The demand for biofuels has increased over the last 30 years and during the same time period the price of oil has risen. In this thesis we have investigated the impact that taxes on fossil fuels had on the demand for biofuels between 1970 and 2003. We have looked at five different fossil fuels, the ones the most frequently used. A large impact of fossil fuel taxes would imply an increase in the biofuel market in Sweden due to such taxes and therefore make this market in Sweden a more attractive alternative for foreign investors. The result might indicate trends towards the conclusion that high fossil fuel taxes get more effective the larger the biofuel market is, since adequate substitutes for fossil fuels are required. Unfortunately, most of our results show insignificant results and therefore no strong conclusions can be drawn