The ethanol industry is established mainly in the United States and Europe. In the US, over 95 percent of ethanol is corn-based. This ethanol production pathway has been criticized for having an unfavourable net energy balance and significant arable land and water requirements, as well as environmental impacts such as soil erosion, loss of biodiversity, and higher volatile organic compound and NOx pollution. The legislation to limit green house gas (GHG) emissions is a key driver of lignocellulosic ethanol which has been shown to reduce GHG emissions drastically (88%). The feed versus fuel debate is also driving lignocellulosic feedstocks such as agricultural and forestry residues (canola straw), herbaceous (alfalfa, switch grass) and woody crops. For this reason, major ethanol producers such as the US have identified agricultural and forestry residues, municipal solid wastes, herbaceous and woody crops as feedstocks for the production of transportation fuel. In Canada, ethanol production is still grain based and dominated by wheat and corn. These, however, only make a small contribution (0.24 billion litres/year production capacity) to the international ethanol market. There is emerging interest in lignocellulose-based ethanol production in Canada. At commercial level, Ottawa-based logen Corporation successfully operates a cellulosic ethanol plant which is recognised as economically and environmentally viable. There are existing and emerging ethanol plants in Western Canada with great potential for the production of lignocellulosic ethanol. However, there are drawbacks related to production in Western Canada; these include complex conversion mechanisms, techno-economics, and sustainable feedstock supply throughout the year. Although there are efforts towards improving the economics of enzyme-based processes, very little is known about techno-economics in Western Canada. This study has several objectives: to review the extent to which cellulosic ethanol in Western Canada represents a more cost-effective process, including its impact on the environment and generation of a greater energy output to input ratio relative to grain-based ethanol; to assess sources of lignocellulosic biomass, their availability and potential for use as feedstocks for ethanol production in Western Canada; to analyze potential challenges in sustaining a lignocellulose-based ethanol industry in Western Canada.