Global warming caused by the emission of CO2 in industrial flue gas has attracted more and more attention. Therefore, to fix CO2 with high efficiency and environmentally friendly had become the hot research field. Compared with the traditional coal-fired power plant flue gas emission reduction technology, carbon fixation and emission reduction by microalgae is considered as a promising technology due to the advantages of simple process equipment, convenient operation and environmental protection. When the flue gas is treated by microalgae carbon fixation and emission reduction technology, microalgae cells can fix CO2 in the flue gas through photosynthesis, and simultaneously absorb NOx and SOx as nitrogen and sulfur sources required for growth. Meanwhile, they can also absorb mercury, selenium, arsenic, cadmium, lead and other heavy metal ions in the flue gas to obtain microalgae biomass. The obtained microalgae biomass can be further transformed into high value-added products, which has broad development prospects. This paper reviews the mechanisms and pathways of CO2 sequestration, the mechanism and impacts of microalgal emission reduction of flue gas pollutants, and the applications of carbon sequestration in industrial flue gas by microalgae. Finally, this paper provides some guidelines and prospects for the research and application of green emission reduction technology for industrial flue gas.