At these prices the Brazillian ethanol is actually cheaper than US-made stuff, even with the tariff. So I'm not at all surprised. At least sugarcane ethanol has a good energy return.

I would have to see where they grow the cane.
They were cutting forest to make charcoal to smelt iron ore to pay their debts.
Now they clear land to raise cattle for fast food chains.
I think finding the facts before making judgements is a good idea.

Actually, the cost of Brazilian cane ethanol plus tariff is not cheaper than US corn ethanol. It is less than the market price for ethanol right now. The sudden switch over from MTBE to ethanol has caused supply to demand ratio to decrease, and increase price. This increased price is more than the cost of Brazilian ethanol plus shipping/handling plus tariff. Thus it is below market price at the exchange, and thus imported to meet demand. If the ethanol production goes up relative to demand, the price will come down, and the Brazilian ethanol importation might slow to a trickle.
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___As pointed out by Adrian, sugar cane production depletes the soil nutrients. Some are replaced via recycling the waste biomass that contains minerals from the soil. Organic carbon may come in the same way or from compost from sewage treatment or garbage. Fixed Nitrogen is the harder issue because while plentiful, it has to come from certain plants/organisms or synthetic fertilizers. Ironwood tree in New Guinea is one example. In the long term, the already cleared land may be modified and pressed into service as algae oil+ biomass ponds/production facilities. This may reduce the drive for sugar cane fuel, and may produce the requisite minerals/compost for cycled soil restoration on other already cleared land. Thus, the destructioon of the rain forests may stop, or at least slow to a crawl. With farmland soil being revitalized(plus better crops with better yields), there is no need to push farther into the Amazon. Ranchers can grow fast growing grasses, and along with crop leftovers (leaves, stalks, etc) feed their animals without destroying ever more of their ecosystem.
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___Brazil has enough cleared land already, that if restored and developed, is large enough to provide for their future food, and energy needs. It is large enough for them, if proper management, R&D, and consumption policies are implemented, to export to the world too.

Hmm, what if we used genetically modified corn or sugarcane that could be grown in cooler climates or inside greenhouses and required less nutrients but yielded more?

At a relatively conservative estimate of 5,000 gallons/ acre for algae oil. Some estimates have gone as high as 20,000 gallons/acre.

As pointed out by Adrian, sugar cane production depletes the soil nutrients.

It's my understanding that this isn't always the case. Sugar cane has been grown in some places for centuries, with yields improving with time. One recent theory is that this is due to burning of the stubble creating charcoal, which has recently been discovered to be a remarkably effective soil amendment for acid tropical soils.

Algae only need 1 cm of water depth to do their thing. making the ponds any deeper will not improve productivity. One source stated that pound for pound algae used only 10% of the water needed to grow corn or beans.

Switching to liquid ethanol or n-butanol may not be sustainable in North America, (mainly in USA due to large increasing population, on-going love affair with cars and heavy SUVs and reduction in liquid fossil energy availability), unless US residents reduce their per capital liquid fuel consumption to less than 1/4 and even 1/10 the current rate.

Note: Canada does not have the same problem because of huge Oil reserves and much more water and land per capita.

A reduction to 1/4 can be easily be achieved, for personnal transportation, by switching our 15 mpg gas guzzlers for lighter more efficent 60 mpg vehicles. They already exist and many more will be available by 2010.

A reduction to 1/10, from 15 mpg to 150 mpg will be possible with PHEVs after 2010.

Trying to locally produce enough ethanol and n-butanol to replace most liquid fossil fuels without downsizing our vehicles and increasing their efficiency is unreal.

Add smart car pooling too!