China originally planned to use fuel ethanol gasoline nationwide in 2020, and taking corn as an important raw material of ethanol gasoline, this paper analyzed the life cycle cost model of corn fuel ethanol gasoline and traditional gasoline from production to consumption, including internal and external cost calculations. The internal cost is the actual cost of the industry chain, while the external cost is converted into the cost value by examining the environmental impact of pollutant emission levels in each stage of the life cycle of ethanol gasoline production. Based on this model, by selecting the project data of specific regions and manufacturers in China, it can be calculated as follows: The main links affecting the internal cost of ethanol gasoline production are crude oil procurement cost, refinery and ethanol plant construction cost; The main influencing link of external cost is the emission of ethanol gasoline combustion, including the fuel, power and other energy consumption factors in the production of ethanol and gasoline; The cost can be optimized from the perspective of production technology, technological process, energy material consumption and various labor costs. Assuming E10 is used in the whole Chinese market, the empirical results are as follows: among the pollutants produced by the use of ethanol-added gasoline in the whole region, CO2 emission reduction is the largest, exceeding 53 million tons, followed by CO and wastewater emission reduction of 1.78 million tons and 1.58 million tons respectively. In terms of the conventional gasoline, the CO emission reduction of about 20% is the largest, followed by about 17% reduction of HC, about 15% reduction of SO2 and about 9% reduction of CO2 respectively. These results show that the promotion of ethanol gasoline (E10) usage in China has a considerable reduction effect of emission if the availability of raw materials are sufficient. The life cycle external cost of ethanol gasoline is 11.45%, lower than that of conventional gasoline. In 2019, China’s fuel ethanol production capacity was 4.15 million tons, and the actual production was about 3 million tons. Assuming that all of it were used to produce E10 ethanol gasoline, compared with traditional gasoline consumption, the emission reduction benefit of E10 gasoline would be nearly $84.7 million.