Why is burning bi-ethanol fuel better for the environment?

It's really not. It's costing more to produce it since the demand on corn and other fermentable bio-m has increased. The main reason it was touted was to replace some of the imported oil that went for auto fuel. The fact that the mileage is less is not important. With the subsidies from the government for manufacture, and farming, and the transportation costs involved (it can't be shipped by pipeline) and the drop in efficiency, the real cost is more than the cost of premium.