This paper analyses the potential environmental impacts and economic viability of producing biodiesel from microalgae grown in ponds. A comparative Life Cycle Assessment (LCA) study of a notional production system designed for Australian conditions was conducted to compare biodiesel production from algae (with three different scenarios for carbon dioxide supplementation and two different production rates) with canola and ULS (ultra-low sulfur) diesel. Comparisons of GHG (greenhouse gas) emissions (g CO(2)-e/t km) and costs (not subset of/t km) are given. Algae GHG emissions (-27.6 to 18.2) compare very favourably with canola (35.9) and ULS diesel (81.2). Costs are not so favourable, with algae ranging from 2.2 to 4.8, compared with canola (4.2) and ULS diesel (3.8). This highlights the need for a high production rate to make algal biodiesel economically attractive. Crown Copyright (C) 2010 Published by Elsevier Ltd. All rights reserved.