The economic feasibility and technological improvement to produce biodiesel from microalga, Chlorella vulgaris is investigated. The biodiesel would help Malaysia replace diesel with renewable and sustainable energy in the transportation sector. Accordingly, the Malaysian Agriculture and Plantation Greenhouse Gas Model is modified and extended to incorporate algal farms. The model forecasts Malaysia’s market prices and quantities of major agricultural commodities between 2024 and 2064. The state of the art is a commercial algal biodiesel industry is incorporated into a price endogenous model of Malaysia’s agriculture, and algal farms can experience technological improvement. The simulation results indicate that algal biodiesel is not economically feasible. The biodiesel price must be RM2.80 per litre or higher for the algal farms to produce biodiesel. The biodiesel price could be lowered to RM0.60 per litre if the algal farms experience a one-percent annual boost in either algal harvest yield or productivity gain. The results indicate that harvest yield improvements boost biodiesel production more than productivity improvements. The feasibility depends on algal farms to process the leftover slurry and supply the domestic animal feed markets. At last, the biodiesel offsets CO2 transportation sector emissions while the alga recycles the CO2 from fossil fuel electric power plants, which help Malaysia sequester high levels of CO2.