The use of fossil fuels is now widely accepted as unsustainable due to depleting resources and the accumulation of greenhouse gases in the environment that have already exceeded the “dangerously high” threshold of 450 ppm CO2-e. To achieve environmental and economic sustainability, fuel production processes are required that are not only renewable, but also capable of sequestering atmospheric CO2. Currently, nearly all renewable energy sources (e.g. hydroelectric, solar, wind, tidal, geothermal) target the electricity market, while fuels make up a much larger share of the global energy demand (∼66%). Biofuels are therefore rapidly being developed. Second generation microalgal systems have the advantage that they can produce a wide range of feedstocks for the production of biodiesel, bioethanol, biomethane and biohydrogen. Biodiesel is currently produced from oil synthesized by conventional fuel crops that harvest the sun’s energy and store it as chemical energy. This presents a route for renewable and carbon-neutral fuel production. However, current supplies from oil crops and animal fats account for only approximately 0.3% of the current demand for transport fuels. Increasing biofuel production on arable land could have severe consequences for global food supply. In contrast, producing biodiesel from algae is widely regarded as one of the most efficient ways of generating biofuels and also appears to represent the only current renewable source of oil that could meet the global demand for transport fuels. The main advantages of second generation microalgal systems are that they: (1) Have a higher photon conversion efficiency (as evidenced by increased biomass yields per hectare): (2) Can be harvested batch-wise nearly all-year-round, providing a reliable and continuous supply of oil: (3) Can utilize salt and waste water streams, thereby greatly reducing freshwater use: (4) Can couple CO2-neutral fuel production with CO2 sequestration: (5) Produce non-toxic and highly biodegradable biofuels. Current limitations exist mainly in the harvesting process and in the supply of CO2 for high efficiency production. This review provides a brief overview of second generation biodiesel production systems using microalgae.