Biodisel is a replacement for diesel fuel that is produced from biological material. Unlike ethanol, which is made from sugars, biodiesel is made from natural oils. These oils can come from a variety of sources, the most common being soybeans. Biodiesel is not produced on as a large a scale as is ethanol, but it is well suited to smaller-scale, local production and consumption. Biodiesel is typically sold in blends ranging from B2 (2% biodiesel, 98% diesel) to B20 (20% biodiesel) and can be used in virtually any diesel engine.  Locally, James Madison University and the city of Harrisonburg have been using biodiesel blends in buses for over a decade.

One popular area of research is biodiesel from oil derived from algae.  Theoretically, algal biodiesel can produce significant yields without competing with with land for food production.