So where did anybody get the idea that bio-fuels are supposed to reduce CO2?
Fossil fuel use = apples.
CO2= oranges.
Alternative fuels are just that, alternatives to fossil fuels. Where does C02 come in to it?
Erm... This is so wrong, I'm not sure where to begin to say how wrong it is.
Fossil fuels contain massive amounts of carbon locked away deep underground where it is not part of the normal carbon cycle. Burning or cracking fossil fuels releases this carbon into the atmosphere in the form of CO and CO2, increasing the percentage of CO2 in the atmosphere, which may or may not be handled adequately by existing carbon sinks like oceanic plankton and bacteria, and terrestrial vegetation. It's a net positive increase in carbon added to the ecosystem.
Biofuels, when produced without the use of fossil fuels, are part of the natural carbon cycle. They absorb carbon from the atmosphere and ground while growing, and released the same amount of carbon back into the ecosystem when converted to energy. It is a balanced system with a net zero loss or gain.
The problem with ethanol produced using corn feedstock, and to a lesser extent biodiesel produced using soy feedstock, is that a considerably amount of fossil fuel is used, in the form of fertilizer as well as fuel, in the production and transportation of these fuels. The fertilizer issue isn't as great a problem with soy which, being a legume, helps replenish soil by fixing atmospheric nitrogen, but is critical with corn; but there is still the problem of the conversion existing forest land carbon-sinks over to cultivation of crops which do not act as sinks.
Studies on hempseed shows it to be better than soy for producing oil as it contains 30-35% of its dry weight as oil, vs 20% for soy; and given that seeds account for roughly 50% of the dry weight of the entire plant at cultivation vs... IIRC it's about 30% for soy, it's also considerably more productive per acre. It will grow effectively in marginal soil, requiring a smaller load of organics and fertilizers. So, it can be cultivated without replacing existing old-growth forests or food crops, and therefore does not displace existing major carbon sinks, and is itself an excellent food crop. The one disadvantage is that it doesn't fix nitrogen like soy does; so some form of crop rotation with a nitrogen-fixing legume or other plant that also grows well in marginal soil (such as clover), is necessary for sustainable farming.