Biomass integrated gasification combined cycle (BIGCC) plants could, in combined heat and power (CHP) generation, increase the power-to-heat ratio compared to conventional biomass steam turbine plants. Furthermore, biomass gasification could also be used for the efficient production of biofuels for transport. In this study, different applications of biomass gasification in connection to district heating (DH) are analysed and contrasted to conventional technology options. An application of the cost-optimizing energy system model MARKAL with a detailed description of the DH sector in a southwestern region of Sweden was developed within the study and used in the analysis. Policy measures for CO2 reduction and for promotion of "green" electricity are assumed, and required subsidy levels for large-scale production of transport biofuels are calculated. The model also operates with different supplies of biomass: a local supply at a lower cost and an international supply of refined biomass at a slightly higher cost. The study shows that investments in BIGCC CHP are often cost-efficient in cases with low ambitions regarding transport biofuels. However, due to limitations in heat demand and in local, lower cost, supply of biomass, investment in biofuel production means less investment in BICCC CHP and, thereby, a smaller electricity production. (C) 2009 Elsevier Ltd. All rights reserved.