In this paper, we verify the impacts that expanded bio-fuel consumption may have on reduction of CO₂ emissions from automobiles in the household sector. We believe increasing production volume by popularizing bio-fuels may help increase the household income of farmers that produce raw materials for bio-fuels and increase the total household Equivalent Variations (EV) . First, considering the tax privileges provided for E10 (10% ethanol blended) and B5 (5% bio-diesel blended) , the indirect tax rate for bio-fuel decreased by 85.34% when subsidies were deducted from the taxable income. Based on these estimations, we performed a simulation to detect the effectiveness of a campaign popularizing bio-fuel usage alone by utilizing the Computable General Equilibrium (CGE) model to reproduce the actual situation of bio-fuel popularization in 2007. As a result, the rate of change in CO₂ emissions from automobiles decreased 0.266% and the total household EV gained 1.14 billion baht due to increased farmer and non-farmer household benefits in areas other than the Greater Bangkok Metropolitan. In addition, simulations in which the indirect tax rate for bio-fuel gradually decreased from the level in 2007 showed that the consumption of bio-fuels has been rising and the reduction of CO₂ emissions has been expanding to increase the total household EV. Second, when blended fuels such as E10 and B5 are fully used by the household sector it is even more important for the Thai government to provide subsidies to the bio-fuel industry and industries supplying bio-fuel materials for promoting bio-fuel usage policies and sustained economic development. To secure financial resources to achieve this purpose, the government should raise indirect taxes for the services industries. At the same time, the government should also take measures to decrease the direct tax rate for households. In our simulation based on this scenario, it was possible to reach a decrease of 0.685% in the reduction of CO₂ emissions by substituting bio-fuels for fossil fuels even though fuel consumption expanded with an increase in the income of farmer households. As spillover effects on activities in the production sector, we found the following. First, the negative effects on the agriculture food processing industries by preferential treatment of the bio-fuel industry and bio-fuel related industries remained small. Second, the production volume of other agriculture products such as livestock, fishery, rubber and other crops decreased because production shifted to bio-material crops for the bio-fuel industry. Third, an increase in the indirect tax for service industries had the largest negative effects on the transportation and communication industries. Based on the above, if the Thai government can promote bio-fuel usage policies as planned, it is possible not only to reduce CO₂ emissions but also to increase the benefits for the household sector. JEL Classification: C68, O53, Q42, R13, R38