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The pressure for environmental protection and reduction of energy dependence combined with strong economic motivation for lowering fossil fuel consumption and energy prices has driven Europe and other countries toward the exploitation of biomass for energy. More recently, after a good number of very ambitious national programmes for the promotion of energy from dedicated crops, we are facing the problem of food shortages and food price pressures worldwide, due to changes in the use of land. This article examines the economics of cultivation of giant reed (Arundo donax L.), miscanthus (Miscanthus × giganteus) and switchgrass (Panicum virgatum L.), in marginal lands of South Europe, and investigates the conditions under which such cultivations would be justified on economic grounds. By using life cycle costing analysis (LCCA) and discounted cash flow (DCF) methodology, the annual equivalent costs estimated are expressing in the most comprehensive way lifetime costs. It has been found that under current economic and climatic conditions in South Europe, perennial grass production cost in marginal lands is significantly affected by the degree of Bland marginality^. We estimate an average yield loss of approximately 40 % due to land marginality. In northern regions of Mediterranean Europe with high precipitation levels, irrigation costs are lower and yields are higher. In the south, the cost of irrigation can be as high as 20 % of total cost. The cost of producing and delivering biomass to the market ranges between 60 and 80 €/dry tonne. Giant reed has been found to be the most cost-effective of the three crops, mainly because of its relatively high yields in comparison to the other two crops. Considerable data variability, indicative of regional distinctiveness, does not allow definitive conclusions.

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