First generation biofuels are commercialized at large as the production technologies are well developed. However, to grow the raw materials, there is a great need to compromise with food security, which made first generation biofuels not so much promising. The second generation of biofuels does not have direct competition with food but requires several energy intensive processes to produce them and also increase the land use change, which reduces its environmental and economical feasibility. The third generation biofuels production avoids issues with first and second generation biofuels, viz. food-fuel competition, land use change, etc., resulting in being considered as a viable alternative energy resource. On all dimensions of sustainability (environmental, social and economical), a life cycle assessment approach is most relevant to avoid issues in problem shifting. The utilization of organic waste and carbon dioxide in flue gases for the production of biomass further increases the sustainability of third generation biofuels, as it does minimize greenhouse gases emission and disposal problems.