Recently the interest in biofuels is continuously increasing mostly due to environmental, economic and geopolitical factors. Harmful gases emissions, growing crude oil prices, and the increasing dependency on foreign oil supplies are determinant factors that motivate governments to pursue alternative fuel sources, such as ethanol. Recognizing the importance of energy as a vital component in economic development and the global commitment on the CO2 mitigation, the Taiwanese government has been continuously revising its energy policy, seeking to balance economic development, energy supply, and environmental protection. Moreover Taiwan has clearly and strongly committed to develop green energy by adopting the Statute for Renewable Energy Development, among other actions. Given this scenario, the aim of this paper is to analyze the efficiency of a hypothetical governmental policy to implement a sugarcane ethanol blending on fossil fuels in Taiwan. The impact of policy is examined mainly on CO2 emissions, balance of payments, particularly in terms of imports scenarios and land use. The analysis is based on three different scenarios for blending Brazilian sugarcane ethanol to all gasoline sold for household cars and motorcycle transportation: 5% (E5), 10% (E10) and 20% (E20); as well as on simulations of different domestic and imported ethanol shares on Taiwan supply. In order to proceed such analysis this research presents an econometric model system to estimate the demand for gasoline from the Taiwanese road transport sector, emphasizing the effects of national income and real petrol price. The model is used to perform a prediction of a 10-year forecasting horizon, consequently allowing forecast the consumption of ethanol for each scenario after its implementation along that timeline. It is found that 1 liter of Brazilian sugarcane ethanol in substitution of 1 liter of gasoline in Taiwan avoid 42.36% of GHG emissions. Furthermore the price for the fuels E5, E10 and E20 are expected to become increasingly cheaper for the period of analysis, stimulating the demand and diminishing the policies effectiveness. Despite this, the higher is the addition of ethanol in gasoline, more positive is the effect of the policy simulated. Given these and other findings for different policy scenarios, the appropriate strategies are discussed and suggested in order to contribute to reduce greenhouse gas emissions in Taiwan, considering policy implications regarding external trade and land use impact.