An increasing need to find alternatives to fossil fuels, and a growing awareness of the global warming effect has resulted in substantial research and development on biofuels. Biofuels are being considered a potential substitution of petroleum based fuels in the transport sector.With this increasing interest in biofuels comes the need to establish the environmental effect of the fuels. Results from several life cycle assessments reviewed in this report show that there are some benefits of biofuels in global warming impact compared to conventional fuels. How great this benefit is varies between the studies. Differences in critical issues such as allocation, carbon sequestration, and fertilizer use have significant impact on the results of the life cycle assessments. There is a lack of studies dedicated to investigating other environmental areas. The studies that have, show little consistency in their results, but indicate an increase of damage in categories such as acidification and eutrophication. No consistent results were shown on impact categories such as human toxicity potential or photochemical smog.Second generation fuels are claimed to be more sustainable than first generation fuels. There are many different types of second generation fuels being developed. Research and Development have resulted in technologies such as hydrolysis, pyrolysis, gasification and hydrothermal upgrading . Technology challenges and high costs still exist with these technological solutions, the second generation bio-fuels being 2-3 times more expensive than conventional fuels.Most of the second generation fuels are in their pilot phase, but several successful pilot projects exist for both hydrolysis and gasification. Gasification to produce bio-fuels is especially promising. The company Choren, who uses this technique, is planning to produce and sell their products in 2007. One of the main products of the company is Fischer-Tropsch (FT) diesel.A life cycle assessment on a second generation biofuel was performed. This was done by doing a Hybrid analysis on a Fischer- Tropsch diesel following the gasification route. The Hybrid analysis consists of a foreground and background system. The foreground system comprises important processes in the fuels lifetime. This includes biomass production, transport, production and use of the fuel. The background system contains economic data taken from the Norwegian background. The aim of the LCA is to compare the environmental effects of a second generation biofuel with first generation biofuels, and the impact category chosen in the impact assessment is global warming potential.The results of the work show that the global warming impact throughout the life cycle of the biofuel is 39 eq g/km. This proves to show a considerable reduction in the category, compared to both conventional diesel and average values of first generation biofuels. This implies that Fischer –Tropsch diesel is a more sustainable transport solution, yet more work is suggested to be taken on investigating the overall environmental impact of both second generation and first generation biofuels. .