Carbon dioxide (CO2), being an important greenhouse gas (GHG) significantly present in Earth's atmosphere, has been increasing because of several anthropogenic activities leading to global warming. Globally, various efforts have been made to confront climate change, and various CO2 capture and storage methods have been designed. This review aims at describing detailed studies about algae and the methods used by algae to capture and sequester carbon from the atmospheric environment. Algae exist in varied terrestrial and aqueous habitats. Under certain conditions, microalgae are potential accumulators of lipids, which act as a biofuel. Algal biofuel production promotes carbon sequestration and future energy production. This review explicates the opportunities and challenges for biological systems in CO2 sequestration by algae. In addition, the CO2 fixation by algae is explored and leading biochemical channels and enzymes involved in it are studied.