The use of oxygenate materials derived from agricultural produce as transportation fuels is receiving considerable attention in Europe. Since they are produced from renewable resources, bio-fuels appear to offer no net CO2 emissions and reduce the dependence on fossil fuels. The true situation is more complex and the purpose of this paper is to clarify the issue by providing a review of available data from a European perspective. In the case of bio-ethanol, the energy consumed in producing the fuel can equal the energy content of the ethanol itself so that there are no net CO2 and virtually no energy gains. The use of methyl ester (RSME) produced from oil-seed rape (canola or colza) oil gives a positive energy balance, but even here half the energy content of the fuel is required in its manufacture. Oxygenated fuels can give lower emissions of HC and CO, but some emissions, notably NOx, can be increased, and effects on diesel particulates are variable. The true costs of bio-fuels are several times higher than those of conventional gasoline and diesel fuels, and alternative investments are likely to achieve greater environmental and energy gains.