Any diesel engine can run on bio-diesel.

The advantages of bio-diesel are low sulfur content, low particulate emissions, fewer aromatic hydrocarbons than fossil diesel, it has higher lubricity, and it is biodegradable and non-toxic.

The disadvantages are that it produces more nitrogen oxides when burned, it attracts water which is not good for engines, it gels at a higher temperature than petroleum diesel, and it has slightly lower energy content per gallon.

The use of catalytic converters to remove the nitorgen oxides, and additives to lower the gelling temperature for winter use, are compensating for some of the drawbacks of bio-diesel.

The main advantages that get the most press are that bio-diesel is renewable, and all the carbon dioxide it releases into the atmosphere came from the atmosphere in the first place, making it a carbon neutral fuel. And iit can be produced locally.

The U.S. uses 230 billion gallons of diesel in a year. The most famous source of bio-diesel is waste vegetable oil from restaurants, but only 300 million gallons per year is available (0.13% of the need).

Growing a cop of canola oil yileds 145 gallons per acre, and needs about 9 gallons per acre of diesel to produce, for a net yield of 136 gallons per acre. The whole process of converting sunlight to bio-diesel has an efficiency of about 1% (solar panels range from 12% to 20%).

However, high oil content algae can be grown in ponds in the desert, where there is lots of sunshine, and the land is not used for food crops, and the yields exceed 10,000 gallons per acre. Growing algae in wastewater ponds at sewage treatment plants is another approach that has side benefits of removing fertilizer from the water. Growing algae on flue gas emissions from power plant smokestacks reduces carbon dioxide and nitrogen oxide emissions from those plants as it turns sunlight into fuel.

Another way to make bio-diesel is through the Fischer-Tropsch process. Vegatable waste matter (straw, wood chips, yard waste, etc.) is heated without oxygen to produce syn-gas, a mixture of hydrogen and carbon monoxide. This gas is then reacted further to produce diesel fuel and water.

While Fischer-Tropsch synthesis usually is done using coal or natural gas as feedstocks to produce zero sulfur diesel, using waste biomass results in a carbon neutral source of fuel.

You can modify a normal diesel engine to run on straight vegetable oil (known as SVO). While the engine will run on SVO without modification, the modification kits include modified injector nozzles, stronger glow plugs, fuel heaters for cold weather, temperature controls, and better fuel filters. You can do the modifications yourself from the kits, or you can have a mechanic do it for you.