Recently completed NREL/USDOE contracts with Genencor and Novozymes have resulted in a 12-fold reduction in cost/unit enzyme from reduced enzyme production costs and improved enzyme activity. However, it is estimated that at least a further 2- to 3-fold cost reduction is required to produce competitive economics for lignocellulose-to-ethanol processes. It is unlikely that the already high levels of protein production by Trichoderma reesei can be increased to provide these required cost savings. Further improvement of enzyme specific activity by rational design and genetic manipulation remains a relatively long-term prospect. On the other hand, the prospects for achieving a 2-to 3-fold cost reduction by enzyme recycling appear favourable. By expanding the ethanol industry to include lignocellulosics, a range of areas suitable for the application of bioconversion technology is created.