Abstract The paper describes results of the BioCosts project in which a comprehensive analysis of the economic and environmental performance of the energy use of biomass was carried out for selected existing facilities throughout the European Union. It is demonstrated that the appropriately organized use of biofuels has significant environmental advantages compared to the use of fossil fuels. Mitigation of global warming is the largest single incentive to use biofuels. However, only a few technologies are economically competitive under prevailing conditions, while others lead to up to 100% higher energy production costs than fossil fuels. Employment effects of using biofuels are small but positive.