The Thai government has been promoting renewable energy as well as stimulating the consumption of its products. Replacing transport fuels with bioethanol will require substantial amounts of water and enhance water competition locally. This study shows that the water footprint (WF) of molasses-based ethanol is less than that of cassava-based ethanol. The WF of molasses-based ethanol is estimated to be in the range of 1,510–1,990 L water/L ethanol, while that of cassava-based ethanol is estimated at 2,300–2,820 L water/L ethanol. Approximately 99% of the water in each of these WFs is used to cultivate crops. Ethanol production requires not only substantial amounts of water but also government interventions because it is not cost competitive. In Thailand, the government has exploited several strategies to lower ethanol prices such as oil tax exemptions for consumers, cost compensation for ethanol producers, and crop price assurances for farmers. For the renewable energy policy to succeed in the long run, the government may want to consider promoting molasses-based ethanol production as well as irrigation system improvements and sugarcane yield-enhancing practices, since molasses-based ethanol is more favorable than cassava-based ethanol in terms of its water consumption, chemical fertilizer use, and production costs.