Biodiesel is produced by a chemical reaction between methanol (alcohol) and either vegetable oil or animal fat. It can be used on its own as a substitute for diesel, or blended with diesel to reduce emissions. The following emissions information is based on a B20 ratio in New Zealand.
In B20 ratio:

• 20% drop in hydrocarbons: Hydrocarbons are petroleum in its pure form. When using a B20 ratio, only 80% petroleum is being used, hence the 20% drop in hydrocarbons.
• 12% drop in particulate matter which is fine dust or soot suspended that stays suspended in the air for periods of time. They are directly linked to respiratory disease and other human illnesses.
• Reductions also occur CO (carbon monoxide), CO₂ (Carbon Dioxide), and Sulphur Dioxide all of which are proven to be harmful to the environment and / or humans.
• However, there is a trade-off for the reduction of these emissions. An increase in Nitrogen Oxide (NO_x) occurs with the use of biodiesel. Nitrogen Oxide is a smog-forming pollutant. Increases in NO_x emissions can, though, be minimized through engine modifications, fuel additives, or exhaust after-treatment devices.

Currently in New Zealand, the biggest potential source of biodiesel is tallow, an animal fat, which is a by-product of meat-processing. New Zealand produces around 150,000 tonnes of tallow per year, most of which could be made into biodiesel. Other products, such as used cooking oil from restaurants and fat by-products from commercial food production, could also be made into biodiesel. Crops such as canola and rapeseed could be grown to ensure a greater supply of vegetable oil for biodiesel. As well as being renewable and having climate change benefits, biodiesel has a number of other advantages over ordinary diesel:

• Pure biodiesel is biodegradable, non-toxic and less hazardous than ordinary diesel. If spilt, it is easily broken down by bacteria, reducing environmental impacts. Even small amounts of biodiesel mixed with diesel will speed up the breakdown of fuel spills.
• Flashpoint (ignition point) twice as high for biodiesel. (100 degrees Celsius) good for safe transporting etc. Is safe.
• Produced in New Zealand, reducing our dependence on foreign oil.
• Produces similar horsepower and torque as normal diesel. Also has better lubricating properties, providing a cleaner running engine.
• Low emissions.
• Significantly improved air quality.
• Significantly reduces potential carcinogens, as biodiesel contains no aromatics.
• Reduced engine noise.
• Reduced ozone-forming potential.
• Safer - more biodegradable than sugar, less toxic than table salt, flashpoint higher than petroleum diesel.
• Renewable fuel - net CO₂ reduced.
• High cetane, zero sulphur fuel with excellent lubricity.
• Can be blended in any ratio with diesel.
• Plentiful supply of biodiesel elements.

Like diesel, pure biodiesel can solidify at low temperatures. However, the same systems currently used to prevent this happening with diesel, are used for biodiesel blends. Care needs to be taken with the storage of biodiesel such as keeping the fuel free from water. While a 5% (B5) blend of biodiesel and diesel can be used in all diesel vehicles (provided fuel specifications are still met), some vehicle manufacturers do not currently approve the use of blends higher than B5, even though there should be no need for major engine modifications.

• While a 5% (B5) blend of biodiesel with fossil diesel can be used in all diesel vehicles (provided fuel specifications are still met), some vehicle manufacturers do not approve the use of blends higher than B5.
• As with any diesel fuel, biodiesel can gel at low temperatures. For biodiesel blends, precautions beyond those employed for diesel are generally not needed.
• Care needs to be taken with the storage of biodiesel, such as keeping the fuel free from water.