"The plant in Osaka Prefecture has an annual capacity of 1.4 million liters (about 370,000 gallons US). In 2008, it plans to boost production to 4 million liters (1 million gallons)." The ethanol biofuel is made from wood construction waste using technology from Celunol, the key element of which being a genetically engineered Escherichia coli bacteria that can ferment both C6 (hexose) and C5 (pentose) sugars present in cellulosic biomass. The big benefit of cellulosic ethanol over ethanol made from food crops is that it can be made with waste biomass coming from forestry, construction and agriculture (corn and wheat stalks that are usually burned). It can also use fast-growing, low-impact plants such as switchgrass, hemp and kenaf on land that can't be used for food production.This kind of ethanol should be carbon-neutral since the carbon present in it was absorbed from the atmosphere by the plant that produced the biomass. Some extra energy is required to turn the biomass into ethanol, but there is no reason why that process couldn't be optimized to have minimal impact (it is even possible to burn the hard lignen from the biomass to generate some of the energy needed in the ethanol plant, but the future probably lies with microbial catalysts).
In the best-case scenario, cellulosic ethanol can even be slightly carbon-negative if it is made from switchgrass and other grasses with deep roots that fix carbon from the atmosphere in the soil.
Japan has announced that they want 10% biofuels in their vehicles by 2030. Cellulosic ethanol is definitely the way to go for that.
::BioEthanol Japan (Japanese), via ::BioEthanol Japan Begins Production of Cellulosic Ethanol from Wood Scraps; Uses Celunol Technology, ::Outline of Biomass Nippon Strategy, ::Japan Announces Ethanol Edict for All Vehicles.
See also: ::Google TechTalks: Climate Change, Carbon Trading and Biofuels (check out the Vinod Khosla video - very informative), ::First Commercial Cellulosic Ethanol Plant Announced for Iowa Location, ::Iogen's Cellulose Ethanol - Straw-Powered Cars, ::SunOpta To Build Cellulosic Ethanol Plant Based On Wood Chip Feedstock, ::BlueFire: "Waste" Cellulose To Ethanol