AbstractThe performance of lignocellulosic ethanol in reducing greenhouse gas (GHG) emissions and fossil energy use when substituting for gasoline depends on production technologies and system decisions, many of which have not been considered in life cycle studies. We investigate ethanol production from short rotation forestry feedstock via an uncatalyzed steam explosion pre‐treatment and enzymatic hydrolysis process developed by Mascoma Canada, Inc., and examine a set of production system decisions (co‐location, co‐production, and process energy options) in terms of their influence on life cycle emissions and energy consumption. All production options are found to reduce emissions and petroleum use relative to gasoline on a well‐to‐wheel (WTW) basis; GHG reductions vary by production scenario. Land‐use‐change effects are not included due to a lack of applicable data on short rotation forestry feedstock. Ethanol production with wood pellet co‐product, displacing coal in electricity generation, performs best amongst co‐products in terms of GHG mitigation (−109% relative to gasoline, WTW basis). Maximizing pellet output, although requiring import of predominately fossil‐based process energy, improves overall GHG‐mitigation performance (−130% relative to gasoline, WTW). Similarly, lower ethanol yields result in greater GHG reductions because of increased co‐product output. Co‐locating ethanol production with facilities exporting excess steam and biomass‐based electricity (e.g. pulp mills) achieves the greatest GHG mitigation (−174% relative to gasoline, WTW) by maximizing pellet output and utilizing low‐GHG process energy. By exploiting co‐location opportunities and strategically selecting co‐products, lignocellulosic ethanol can provide large emission reductions, particularly if based upon sustainably grown, high yield, low input feedstocks. © 2011 Society of Chemical Industry and John Wiley & Sons, Ltd