"Americans pay between $4.60 and $14.14 per gallon of gasoline in "external" costs not reflected in the price at the pump."
http://www.icta.org/doc/Real%20Price%20of%20Gasoline.pdf
Biodiesel subsidies are $1/gallon for virgin oil and $.50/gallon for used frier oil.
http://www.ethanolrfa.org/policy/regulations/federal/biodiesel/
Thus if the presence of subsidies were the basis for one's hatred of a particular fuel, you would hate gasoline and diesel at least 4.5 times more than you hate biodiesel, and you would hate biodiesel about twice as much as you hate ethanol, thus you would feel that ethanol is at least nine times better than gasoline. The true cost of ethanol is less than the true cost of gasoline, but oil subsidies artificially deflate gas prices.
This is all a red herring since gasoline can't be the fuel of the future because it is nonrenewable and supply is limited. The future must belong to renewable fuels, and the only options are ethanol, biobutanol, biodiesel, and hydrogen made from wind power or biomass. Of those, ethanol and biodiesel are here now, so all the others have already lost since a solution is required now. In order for a renewable fuel to take hold either:
A) subsidies for oil must end, internalizing all externalities into the cost
B) Tax credits for renewables are made high enough for them to compete despite the tremendous subsidies for oil.
C) Business as usual continues until there are widespread gas shortages and people are unable to buy gasoline to get to work.
Option A alone will cause a massive spike in fuel prices by about $5-14/gallon, leading to gasoline in the $7-16 range. Option B combined with a gradually phased in option A over a ten year period will provide a smooth transition to the new fuels with more stable pricing. Option A alone taken to its full extent would be viable if these taxes were put into the social security pot to fund payroll tax exemptions on the first ~$20k of people's incomes for persons who's total income is less than $50k, thus offsetting the effect of fuel price increases on the poor. I agree that option B alone is an inferior solution to option A, but currently fossil fuel subsidies are much higher than those for renewables, and nobody seems likely to institute option A, so that leaves B.
In order for the transition to occur two things have to happen:
1. All new gasoline vehicles sold in the US must be flex fuel e85 or biobutanol capable.
2. All diesel vehicles sold in the US must be 100% biodiesel capable.
Both of the above should be mandated immediately, with a noncompliance fee of about $400 per vehicle, effective with the next model year vehicles and later. Hydrogen production is less efficient than ethanol production, so hydrogen can't be considered a useful option until after we are already transitioned to renewable fuels. When it comes to biodiesel vs. ethanol, they both have their place, but diesel isn't for everybody due to the hassle of winter operation. If diesel suddenly went mainstream the most common activity for mechanics would go from oil changes to clogged diesel fuel filter changes due to people's fuel line's gelling up in the cold. Only ethanol can replace gasoline, and only biodiesel can replace diesel. Therefore both ethanol and biodiesel are necessities. If biodiesel is really better than ethanol it then it will outcompete it once both are dominant in their respective parts of the fuel market.
As for CAFE standards, there should be only two standards, one for vehicles with four axles or less, and one for vehicles with more than four axles that can't fit into a standard parking space. The parking space clause is really the only way to prevent future loopholes and unintended consequences.