Over the last decade, intensive research has been carried out all over the world to explore the huge potential of microalgae for biofuel production, which could be coupled to the use of industrial flue gas to enhance CO2 fixation as a greenhouse gas mitigation strategy and to remove pollutants from various wastewaters. However, large-scale microalgae production for such purposes is not yet technically and economically feasible. Challenges are thus to increase the efficiency of both algae production and conversion into biofuel. The following parameters are critical for sustainable microalgal biomass cultivation: CO2 concentration; possible use of wastewater streams; light intensity and quality; photobioreactor design; batch, fed-batch or continuous growth conditions. The objective of our research was thus to assess the influence of these parameters on the quantitative and qualitative production of biomass, lipids and added-value chemicals, taking into account the probable antagonism between biomass and lipid production, often depending on the nitrogen supply. Several microalgal species were grown at laboratory scale to compare the yield of biomass and lipid production. In addition to the potential use of oil for biodiesel production, we are currently working towards demonstrating the technical feasibility of an innovative process, for syngas production via hydrothermal processing of microalgae. The process is envisioned as a closed-cycle with respects to nutrients, water and CO2, that are separated and reused for microalgae growth. The possible effect of increasing injection of CO2 in the growth medium was also investigated, with the aim to recycle CO2 from flue gas and enhance biomass production. On the other hand, to achieve the economical and ecological sustainability of algal biofuel production, it will be necessary to integrate it with the extraction of high-value products in a biorefinery process. Carotenoids have been proposed as added-value compounds that could contribute to make microalgal biofuel production economically feasible. Therefore, the viability and sustainability of extracting carotenoids before the hydrothermal treatment of the remaining biomass to produce syngas were investigated. Finally, harvesting and dewatering microalgae cells remains a technical challenge and typically contributes to 20-30% of biomass production costs and can represent up to half of the total cost of algal biofuels. The potential of co-culture of filamentous fungal species with microalgae in a lichenization process as a strategy to reduce the cost and energy consumption of harvesting and of the whole process seems promising and was thus investigated. In submerged cultures, filamentous microorganisms actually aggregate and grow as loosely packed pellets or compact granules. Microalgae cells were immobilized in these pellets and easily removed as an aggregate with the fungal cells. Pellet formation is strain specific and highly dependent on operational conditions during cultivation. This study was especially focused on lichen pellet formation during the co-culture of Chlorella sorokiniana and of an unidentified filamentous fungus, which was eventually characterized. While algae growth was optimal between pH 6 and 10, the highest pellet formation was observed in the pH range of 4-7, thus requiring a strict control of pH during the whole cultivation. The dense formed pellets did sediment in submerged cultures when the agitation was stopped and were easily harvested. The effect of such a co-cultivation on the production of added-value chemicals like carotenoids and on the biofuel potential of the remaining biomass is under evaluation, and will be compared to results obtained with cultivation of microalgae only. The proposed strategies may significantly reduce energy demands with regards to harvesting and dewatering of microalgal biomass and improve the sustainability of the whole process, but should be assessed at larger scale. Acknowledgements: The research was supported by the Swiss Secretariat for Education, Research and Innovation, in the framework of COST Action CM0903 (Utilisation of biomass for sustainable fuels and chemicals).