E85 is a great scam for the car companies, because it's been hyped so that it looks like it's doing something about the problem when it really isn't. GM gets credit for making a greener car if that car can run on E85, but almost all the cars that can burn E85 actually run on gasoline (and there are bunches of them out there, because Ford has been selling them for years, quietly claiming tax credits and not trying to make political hay out of it as well), and they will run on gasoline until E85 is both readily available and *cheaper to use* than gasoline. I haven't seen anyone quoting mileage figures for E85 vs. gas, but I assume that's because they're a great embarrassment to the E85 lobby. Ethanol has a way lower energy content than gasoline, so unless the engine somehow burns it much more efficiently than gasoline, mileage with E85 will be way below that with gas (10% EtOH is standard here, and I notice the mileage boost when I get a tank of 100% gasoline), and nobody will use it until it's cheaper in miles/dollar, not just miles/gallon. If the example of leaded gasoline from a few decades ago holds true, people will bitch and whine up an unbelievable storm about how much E85 sucks until it's actually cheaper, and then suddenly everyone will be using it, even cars that "couldn't" be converted to use it.

In any case, setting up a choice between E85 and hybrid engines is a false dichotomy; there is no reason we shouldn't be able to have FFV hybrids with all the advantages of both.