The discussion on the promotion of biofuels is ambiguous: on the one hand benefits like reduction of greenhouse gas emissions and increase of energy supply security are expected, on the other hand low effectiveness with respect to reducing greenhouse gas emissions and high costs are being criticized. The core objective of this paper is to investigate the market prospects of biofuels for transport in the EU in a dynamic framework till 2030. The major results of this analysis are: (i) Under current policy conditions - mainly exemption of excise taxes - the economic prospects of 1st generation biofuels in Europe are rather promising: the major problems of 1st generation biofuels are lack of available land for feedstocks and the modest ecological performance: (ii) Large expectations are currently put into advanced 2nd generation biofuels production from lignocellulosic materials. With respect to the future costs development of 2nd generation biofuels, currently it can only be stated that in a favourable case by 2030 they will be close to the costs of 1st generation biofuels. However, because of the increasing prices for fossil gasoline and diesel in all international scenarios - given remaining tax exemptions - biofuels will become competitive already in the next few years. (C) 2010 Elsevier Ltd. All rights reserved.