Biodiesel is produced from biomass as feedstock; therefore this type of fuel is renewable. It is typically used as a blend in regular diesel. Feedstock for biodiesel includes soya bean oil, canola oil, corn oil and even animal fats, many of these sources being recycled from restaurants. Combustion of Biodiesel produces fewer amounts of pollutants such as carbon monoxide, carbon dioxide, hydrocarbons and toxic fumes compared to petroleum-based fuel. The US Government says that Biodiesel is carbon-neutral due to the fact that, the carbon dioxide emissions from burning biodiesel can be reabsorbed by the plants grown to provide feedstock for biodiesel production. Biodiesel can be produced from various techniques; recycled vegetable oil can be converted to biodiesel through the process of trans-Esterification which utilizes an acid or a base to accelerate the process. However, the most common method to produce Biodiesel is by the reaction of vegetable oil with methanol in the presence of sodium hydroxide. Using methanol is a cost-effective alternative. Biodiesel from yellow grease is the closest to petroleum-based diesel. Perhaps, the largest market for biodiesel probably will be as a fuel additive, because EPACT requirements are unlikely to increase significantly over the next 20 years. Biodiesel may also be marketed for applications in which reducing emissions of particulates and unburned hydrocarbons are paramount, such as school and transit buses. Because additives improve diesel fuel performance and therefore, are more expensive than diesel fuel, the cost disadvantage for biodiesel would not be as great in the additive market.

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