Fossil fuels which are recognised as common sources of energy are continuously decreasingrnin quantity due to increasing demand, Moreover, the increase in atmospheric carbondioxidernfrom chemical industries like cement plants is resulting in global climate change. In order tornachieve environmental and economic sustainability, 3rd generation biofuel derived fromrnmicroalgae are considered to be the best alternative energy resource compared to 1st and 2ndrngeneration biofuels. Mixed species of microalgae was sourced locally from Kilole Lake atrnBishoftu district and found suitable feed stock to produce algal biodiesel in the laboratory.rnExperiments were carried out using PVC jars of 3.5 litre capacity using 0.1 to 4%rncarbondioxide concentration, air bubbling rate of 0.1 to 7.0 litre per minute and pH rangedrnbetween 5 -7. The maximum biomass was obtained 0.44 gm/lt at pH 7, bubbling rate 3.5rnlt/min and 2% carbondioxide feed. Oil was extracted from the algal biomass and analysed forrnwater content, acid value, and fatty acid composition and saponification value. Algal oil fattyrnacid composition was very low and as a result of this no pre-treatment of algal oil wasrnneeded. Biodiesel produced by transesterfication of algal oil performed by using sodiumrnmethoxide as catalyst, and it was analysed for kinematic viscosity, specific gravity, acid valuernand sulphated ash. The properties of biodiesel tested were within limits of ASTM standard.rnScale up of biodiesel plant in integration with the cement industry facility was studied as arnway to mitigate the carbondioxide released from the plant flue gas as well as to address thernshortage of fossil fuel in our country. Using the preliminary design of the biodiesel plant, arnproduction capacity of 5,860 ton/year biodiesel was obtained and it was possible to capturern22,893.3 ton per year carbondioxide released from the cement industry. The net energy ratiornof the proposed plant is 1.03; meaning 3% of energy can be produced more than required byrnthe process.rnKey words: - Algal biomass, carbon dioxide, lipid oil, Biodiesel, Raceway pond