Why biodiesel doesnot add CO2 to environment ?

When burning petrodiesel the CO2 release in the atmosphere is in fact the CO2 that was “stored” underground in the petroleum layers for many years. Thus this process increases the overall CO2 in the atmosphere as the CO2 does not return underground.
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Using vegetable oils or animal fats as fuel for motor vehicles is in effect running them on solar energy. All biofuels, including ethanol, are derived from the conversion of sunlight to energy (carbohydrates) that takes place in the green leaves of plants.
Plants take up carbon dioxide (CO2) from the atmosphere; burning plant (or animal) products in an engine or burning it any other way releases the CO2 uptake back into the atmosphere, to be taken up again by other plants. The CO2 is recycled, atmospheric CO2 levels remain constant.
Thus biofuels do not increase global warming -- unlike fossil fuels, which release large amounts of new (or rather very old) CO2 which has been locked away from the atmosphere.
Biofuels and Water quality: Water pollution associated with petroleum product includes ground water contamination from spills. Biofuels can replace the most toxic parts of gasoline with fuels that quickly biodegrade in water, reducing the threat to waterways and groundwater. Spills or leaks of biofuels do not constitute an environmental hazard.