The share of fuel import in total imports of goods for Ethiopia rose from 12% inrn2005/06 to 20.1% in 2010/2011. In 2008 the countryâ€™s oil bill exceeded the totalrnexport earnings. The high and often fluctuating fuel prices have frustratedrndevelopment efforts in the country. This has triggered policy makers to review thernenergy development strategies and search for mechanisms that minimize dependencernon high-cost imported fossil oil. An important mechanism identified in this area is tornsubstitute fossil fuels with domestically produced bio-fuel. Currently, investments inrnbiofuel with the aim of producing ethanol and bio-diesel are underway in differentrnparts of the country.rnThis study investigates the impact of biofuel investments on growth, poverty and foodrnsecurity in Ethiopia using a dynamic computable general equilibrium (CGE) modelrnlinked to micro simulation (MS) model. The CGE model uses the 2005/06 socialrnaccounting matrix (SAM) and the MS model uses the 2004/05 Household Income,rnConsumption and Expenditure (HICE) survey. The results suggest that biofuelrninvestment provide a new opportunity to enhance economic growth and povertyrnreduction. Our results also show the complementarities between â€˜biofuelâ€™ and â€˜foodâ€™rnproduction.