Purpose: The purpose of this paper is to offer a critique of government intervention in the production of biofuel in northern Sweden and Finland, highlighting some of the welfare consequences. Design/methodology/approach: After a short review of government interventions, including laws, taxes and subsidies, Austrian economic principles are applied, which lead to universal statements about the impacts of government intervention. Findings: Government intervention on behalf of the biofuel production industry leads to the emergence of an investment bubble, with consequential negative impacts on welfare. Practical implications: The paper informs about the true costs of intervention in biofuel production, which suggests that policy makers may abstain from justifying interventions for the sake of increasing people's welfare. Originality/value: The paper contributes to the research of the production impacts of a new energy technology in the form of biofuel in particular and of governmental intervention in production in general. The paper, furthermore, enhances the use of the method and theory of the Austrian school of economic science.