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Promoting biodiesel industrialization is not only an important measure in addressing the energy crisis and global warming but is also a driver for industrial restructuring and rural development. To promote the development of the biofuel industry, the Chinese central government has set a target that biofuel will account for 15% of transport energy consumption by 2020. The macroeconomic impacts of this policy, however, are unknown. This paper estimates the economic and environmental impacts on Yunnan of meeting this target using a demand-driven input-output model for Jatropha curcas L. biodiesel. The study combines life-cycle analysis and input-output analysis to establish the industrial relationship of the biodiesel sector with other sectors. The results show that meeting the biofuel policy target in 2020 will generate 296,780 thousand job opportunities annually (man-year) and increase household income. Meeting this target will also lower carbon emission by 11.39 million tonnes of CO2 equivalent, valued at 2.41 billion Yuan. However, meeting the target will decrease tax revenue by 1.8 billion Yuan and reduce the provincial gross domestic product by 754.95 million Yuan. Thus, the industrialization of J. curcas L. biodiesel can contribute to the development of a green economy and is a positive response to the policies of energy conservation and emission reduction. The promotion of biodiesel production, however, requires a trade-off between economic and environmental targets.