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Many studies have concentrated on the energy capacity of biodiesel to reduce CO2 emissions at the aggregate level and not much at the sectoral level. This study addresses this gap and attempts to estimate the impact of the use of palm biodiesel on the transport CO2 emissions in Malaysia during 1990–2019. It also predicts the impact of implementing the B10 blending program (10% biodiesel in diesel fuel) on CO2 emissions from transport in this country. For this purpose, this study uses the dynamic autoregressive distributed lag (ARDL) and Kernel-based regularized least squares. This model can plot and estimate the possible actual changes in biodiesel consumption to predict its impacts on transport CO2 emissions. The results suggest that a one-way Granger causality exists GDP from transport, diesel consumption and motor petrol consumption to palm biodiesel consumption. An increase of 1% in the use of biodiesel reduces carbon emissions from road transport by 0.004% in the long run, while, in the short run, it is associated with a 0.001% increase in transport CO2 emissions. The simulated results from the dynamic ARDL model suggest that a 10% increase in the share of biodiesel consumption in fuel transport by 2030 would reduce the rate of the increase in road transport carbon emissions. The improvement and management of new technologies in oil palm plantation and harvesting can help increase palm oil production for biofuels and edible oil and to reduce forest replacement and therefore biodiversity and food security. Highlights: • Results show that GDP and diesel energy consumption stimulate palm biodiesel. • Motor petrol use increases road transport CO2 emissions in the short- and long-run. • Palm biodiesel use decreases road transport CO2 emissions in the long-run. • Continuing current conditions in Malaysia will not reduce CO2 emissions in the future. • The relationship between biofuel consumption and transport CO2 emissions is not clear. [ABSTRACT FROM AUTHOR]