How does substituting biofuel for petroleum reduce the carbon footprint?
The carbon released to the environment could be less with biofuel as each year the growing of the crop recaptures carbon and sends it through the cycle again. Carbon from oil or coal is released from below ground and more is released each year. Of course the biofuel claim is dependent on not releasing more carbon in the planting, harvesting, processing and transportation than is captured in the plant.
Your dillema is caused by applying logic to the situation. That never works with environmental issues. ;-)