The fast diminishing energy reserves coupled with increasing energy consumption as a nation develops and greater environmental awareness have led to an intensified search for viable alternate sources of energy. Natural and renewable resources such as vegetable oils can be chemically transformed into clean-burning biodiesel. Biodiesel is a fuel substitute that is biodegradable and can contribute to alleviating environmental pollution. Research and developmental efforts have demonstrated that palm diesel (palm oil methyl esters) is a good source for energy production. Palm diesel produced using patented PORIM/PETRONAS production technology has been extensively tested as a diesel substitute in a wide range of diesel engines including stationary engines, passenger cars, buses and trucks. Palm diesel exhibits fuel properties comparable to those of petroleum diesel and can be used directly in unmodified diesel engines. The production and usage of palm diesel has great environmental impact with its closed carbon cycle. A fuel switch from fossil fuel to palm diesel will contribute greatly to the reduction of greenhouse gas (GHG) emissions that lead to global warming. Therefore, palm diesel production, because of its contribution to lower GHG emissions, can generate carbon credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol 1997. The financial incentives, like the attractive carbon credit scheme, would bring about an additional positive impact on the economic viability of palm diesel production as a renewable fuel. Furthermore, exhaustive field trials have also shown that diesel engines running on palm diesel do not emit black smoke. There are also reductions in carbon particulates, carbon monoxide and sulphur dioxide. The effort and initiative to utilize palm oil as an alternative energy source are also in line with the Malaysian Government’s five-fuel diversification policy to include renewable energy as the fifth fuel.