Biofuel is a fuel that is created from biological matter known as biomass and can be composed directly from plants or indirectly from agricultural, industrial and commercials wastes. Biofuel can be in a gaseous, liquid or solid state and are divided into four generations. The first generation biofuels are made from biomass intended for the production of biofuel such as food crops that contain high amounts of sugar, starch or vegetable oil. The second generation biofuels are made from various types of biological matter such as waste products like woody crops, agricultural residues or waste plant material and even animal materials. The third generation biofuels are made from algae which are cultivated to contain high amounts of sugar, starch, alcohol or oil that are converted into biofuel by breaking down the algae. The fourth generation biofuels are similar to the third generation biofuels that algae are cultivated to produce the desired chemicals, but the algae are not broken down, therefor making it a continuous process.

Once the sugar, starch, alcohol or vegetable oil is converted to a biofuel, it can be then used to power an engine. Biodiesel, for instance, is a fuel converted from vegetable oil or animal fat that can power a standard car diesel engine with minor to no modifications depending on the biodiesel blend. Fuel efficiency decreases with higher percentage of biodiesel in the blends, but on the other side also do the greenhouse gas emissions decrease. The biodiesel blends are:

• 100% Biodiesel, known as B100. A standard car diesel engine will need modifications to use B100.
• 20% Biodiesel, 80% pertodiesel mixture, known as B20. Little to no modifications necessary for a standard car diesel engine to be powered by B20 fuel.
• 5% Biodiesel, 95% petrodiesel mixture, known as B5. No modifications necessary for a standard car diesel engine to be powered by B5 fuel.
• 2% Biodiesel, 98% petrodiesel mixture, known as B2. No modifications necessary for a standard car diesel engine to be powered by B2 fuel.

The use of biodiesel has multiple effects on the environment. In general, biofuel has less to no sulpher oxide (SOx) emissions, but higher nitrogen oxide (NOx) emissions than standard diesel. Sulpher- and nitrogen oxides cause acid rain and health issues. By using biomass as main source for the production of biofuel, it causes deforestation due to the plantation of commercial agriculture. Plants absorb carbon dioxide (CO2) from the atmosphere to grow and then are converted to biofuel which are then burnt, causing CO2 to be released back into the atmosphere. In theory this results in no additional CO2 in the atmosphere, unlike petroleum fuels. Biodiesel is safer to handle and store than petroleum diesel.

For a vessel to run on biodiesel it is most likely that it is not necessary to retrofit the original engine. Because the fuel efficiency decreases with the use of biodiesel, the range will also decrease compared to regular diesel. There is a low demand for biodiesel due to the higher price than regular diesel fuel. Therefore biodiesel does not pay off financially and this results in that biodiesel is not available at bunkering stations.