The scarcity of known petroleum reserves will make renewable energy resources more attractive. The most feasible way to meet this growing demand is by utilizing alternative fuels. Biodiesel is defined as the monoalkyl esters of vegetable oils or animal fats. Biodiesel is the best candidate for diesel fuels in diesel engines. The biggest advantage that biodiesel has over gasoline and petroleum diesel is its environmental friendliness. Biodiesel burns similar to petroleum diesel as it concerns regulated pollutants. On the other hand, biodiesel probably has better efficiency than gasoline. One such fuel for compression-ignition engines that exhibit great potential is biodiesel. Diesel fuel can also be replaced by biodiesel made from vegetable oils. Biodiesel is now mainly being produced from soybean, rapeseed and palm oils. The higher heating values (HHVs) of biodiesels are relatively high. The HHVs of biodiesels (39-41 MJ/kg) are slightly lower than that of gasoline (46 MJ/kg), petrodiesel (43 MJ/kg) or petroleum (42 MJ/kg), but higher than coal (32-37 MJ/kg). Biodiesel has over double the price of petrodiesel. The major economic factor to consider for input costs of biodiesel production is the feedstock, which is about 80% of the total operating cost. The high price of biodiesel is in large part due to the high price of the feedstock. Economic benefits of a biodiesel industry would include value added to the feedstock, an increased number of rural manufacturing jobs, an increased income taxes and investments in plant and equipment. The production and utilization of biodiesel is facilitated firstly through the agricultural policy of subsidizing the cultivation of non-food crops. Secondly, biodiesel is exempt from the oil tax. The European Union accounted for nearly 89% of all biodiesel production worldwide in 2005. By 2010, the United States is expected to become the world's largest single biodiesel market, accounting for roughly 18% of world biodiesel consumption, followed by Germany. (C) 2007 Elsevier Ltd. All rights reserved.