Biodiesel is produced through a process called transesterification, which combines vegetable oil or animal fat with an alcohol, such as methanol, in the presence of a catalyst, usually sodium hydroxide. This process results in biodiesel and glycerin, which is separated and sold as a byproduct. Biodiesel has a significantly lower environmental impact than fossil fuels, producing 60-90% fewer greenhouse gas emissions and reducing the release of harmful pollutants into the atmosphere.