In the present study Scenedesmus quadricauda was grown in laboratory flasks and outdoor open raceway ponds using industrial flue gas as carbon source to achieve CO2 reduction from the flue gases along with biomass, lipid and FAME (biodiesel) yields. Three sets of experiments were carried out out of which two experiments were carried out in laboratory culture flasks using 6% flue gas-air mixture at a flow rate of 0.1vvm for a minute per every half an hour and per every one hour. The third experiment was planned in the outdoor open raceway ponds using 6% flue gas-air mixture at a flow rate of 0.1vvm for a minute per every one hour. The maximum algal biomass growth of 1.28 g/L, lipid yield of 0.20 g/L and fatty acid methyl esters (FAME) of 0.091 g/L were obtained in 6% flue gas concentrations aerated into culture flasks at 0.1vvm for every one hour. On the other hand the CO2 removal efficiency reached upto 75% along with SOx and NOx reductions upto 50%. Hence in the present study it was observed that the micro alga S. quadricauda utilized the flue gas-air mixture for CO2 reduction and in turn it produced biomass, lipids and FAME yields efficiently.