Energy Secretary Ernest Moniz said the government is looking for ways to increase energy security and reduce greenhouse-gas emissions by advancing a low-carbon economy.
The transportation sector in the United State accounts for nearly 60 percent of domestic oil consumption and 30 percent of overall emissions.
Moniz said the department was rolling out $22 million in new investments for researchers and industry groups to make biofuels competitive with gasoline.
"By partnering with industry and universities, we can help make clean, renewable biofuels cost-competitive with gasoline, give drivers more options at the pump and cut harmful carbon pollution," he said Thursday.
Energy trade groups have said they're concerned about long-term problems for vehicle performance with ethanol blends in gasoline.
The Energy Department said the research projects outlined by Moniz could bring cost-competitive solutions for biofuels and algae-based fuels available to consumers by 2017 and 2022, respectively.