This paper discusses about Biodiesel which can be used as 100% pure or blended with diesel fuel up to 20%. The Global biofuel demand is growing at a 5-10 percent per annum. International Government policy towards emission reduction has created a guaranteed demand for Biodiesel. By blending only a small per cent of biodiesel with fossil fuel such as coconut methyl ester, emissions are reduced, the sulphur content of the fossil fuel lessened. The paper suggests to allocate a minimum of 5% o f its total coconut production for biodiesel production and promote the widespread utilization of biodiesel for the power and transport sectors.