Fast pyrolysis and upgrading is a promising thermochemical pathway that produces pyrolysis oil that can be upgraded via hydroprocessing into hydrocarbon-based transportation fuels (drop-in biofuels). The internal rate of return (IRR) of a fast pyrolysis and upgrading facility is a function of feedstock cost and projected revenues. We calculate the IRR of a fast pyrolysis and upgrading facility under six different policy scenarios: (1) a baseline scenario in which the facility receives no government support; (2) a scenario in which cap-and-trade (H. R. 2454) is enacted with both carbon price and offsets; (3) a scenario in which the Volumetric Ethanol Excise Tax Credit (VEETC) is modified to include drop-in biofuels; (4) a scenario in which the VEETC is replaced with a variable VEETC; (5) the revised Renewable Fuel Standard (RFS2); and (6) the Cellulosic Biofuel Producer Tax Credit (CBPTC). Combinations of these policy scenarios are also analyzed. We find that the policies responsible for increasing the value of pyrolysis products increase facility IRR the most, whereas policies minimizing facility tax burden have an only marginal effect on IRR. DOI: 10.1061/(ASCE)EY.1943-7897.0000061. (C) 2012 American Society of Civil Engineers.