The EU Renewable Energy Directives’ sustainability criteria (EU/2009/28) stated that biofuels must offer at least 35% carbon savings compared with fossil fuels. To all Member States, the European Commission has indicated that the use of the transport biofuels have to reach the lvel of 5.75% in 2010. In Latvia, rapeseed methyl ester (RME) is generally supposed to be one of the more valuable possibilities. As the investment are growing, it is important to evaluate the environmental impacts of these productions and to stress the main sources of these impacts. Nowadays, in Latvia the share of biofuels in the transport sector is attested on a value of 0.3% (around 75% biodiesel and 25% bioethanol). The biofuel production in Latvia doubled in the last two year: the total biodiesel production is now around equal to 64 ktonne/year (year 2009). The aim of this paper is to understand and to model the environmental performance of biodiesel produced by rapeseeds under local Latvian conditions. The energy crops have been studied, with regard to their levels of biodiesel productivity. Current Latvian climatic conditions and cultivation parameters have been taken into account. A comparison with the impacts of the related fossil based diesel has been conducted. The system boundaries include rapeseed cultivation, oil extraction and processing, biodiesel production and final use. The system has been expanded to take into account the valorization of by-products in substitution of natural gas production (from fermentation of straw in the cultivation process), animal feed (rapeseed meal) or chemicals (glycerin). Simapro 7.1 databases and the impacts 2002+ method have been used for the Life Cycle Impact Assessment (LCA). The functional unit was off-road transport over a distance of 100 km by a compact pickup truck. This study shows that the environmental benefits from biodiesel have better results compared to the conventional diesel. The valorization of by-products lead to a considerable environmental improvements. For the global warming environmental impacts the valorazion of the by-product is fundamental in order to have a level lower then that one of conventional diesel. The rsults lead to the conclusion that is feasible to successfully increase the environmental and sustainable efficiency of the analyzed Latvian biodiesel production model. The use of the LCA methodology is a fundamental tool in a foreseeable future increase of the Latvian biodiesel production.