First-generation biofuels are often challenged over their potentially adverse impact on food prices. Biofuels that use nonfood biomass such as lignocellulose are being promoted to ease the conflict between fuels and food. However, their complex processes mean that the total costs of lignocellulosic ethanol may be high in comparison. This might undermine the economic soundness of plans for its use. Another potential advantage of lignocellulosic ethanol is seen in an enhanced contribution to a reduction in greenhouse gas emissions. Yet the increasing attractiveness of lignocellulosic biofuels may also lead to changes in land use that induce additional carbon emissions. For this reason, the environmental impacts of such plans are not straightforward and depend on the affected category of land. The objective of this paper is to compare the economic perspectives and environmental impact of lignocellulosic ethanol with food-based ethanol taking into account market constraints and policy measures. The analysis of the environmental impact focuses on carbon dioxide emissions. In the medium run, i.e., by 2020, lignocellulosic ethanol could enter the gasoline market, crowding out inter alia food-based ethanol. In terms of carbon dioxide emissions, lignocellulosic ethanol seems to be environmentally desirable in each of the analyzed cases. The findings depend crucially on the market conditions, which are influenced inter alia by crude oil, the exchange rate, and technology conditions. (C) 2011 Elsevier Ltd. All rights reserved.