The production of biodiesel from algae could reduce greenhouse gas emissions, help to address future fuel shortages and create jobs in rural Australia.

CSIRO Energy Transformed researcher Dr Tom Beer and his team discovered the humble organisms' green credentials during a detailed life-cycle analysis of the benefits of algal biodiesel.

"Our research has shown that under ideal conditions it is possible to produce algal biodiesel at a lower cost and with less greenhouse gas emissions than fossil diesel," Dr Beer said.

"The greenhouse gas reductions are the result of avoiding the use of a fossil resource for fuel production, capturing methane produced by the processed algae to generate energy and taking into account the potential greenhouse gas offsets from industry."

Algae thrive on carbon dioxide (CO2), which means that environmentally damaging CO2 emissions from industry could also become a useful resource.

Algal biodiesel could also offer a number of other benefits.

"Making biodiesel from algae removes the issue of competing land use because the facilities would not be established on land that might otherwise be used to grow food and the algal farm has a very low environmental impact in comparison to crops that are grown for biodiesel," Dr Beer said.

"Our study also found that the establishment of a 500 hectare algal biodiesel plant in a rural area might create up to 45 jobs and provide opportunities to diversify in the agricultural sector."

The CSIRO Energy Transformed Flagship is working with a number of partners, both national and international, to develop a strong algal biofuel research program.

"The Flagship's research has made significant progress in a short time and our extensive biofuels program will continue to develop solutions that result in a secure fuel future for Australia," Dr Beer said.

Despite the global interest in the production of biodiesel from algae, further research is required to create a viable industry with widespread uptake and impact.

"Although the findings of our study are very promising, challenges still exist in relation to cost, infrastructure needs and the scale of production required to make algal plants feasible," Dr Beer said.

"We see biodiesel from algae as one potential option for sustainable fuel production amongst a range of other technologies."

The paper, Greenhouse gas sequestration by algae - energy and greenhouse gas life cycle studies, is authored by CSIRO Marine and Atmospheric researchers Peter K. Campbell, Tom Beer and David Batten.