Carbon Dioxide (CO2) is the most prominent Green House Gas (GHGs) in the Earth's atmosphere is responsible for climate change and other environmental problems. However, CO2 may be converted into organic compounds and lignocellulosic biomass. The pulp and paper mill is a major industrial sector utilizing huge amount of natural product (woody and non-woody plants), inorganic and organic materials along with large volume of water in different stages of the paper manufacturing. In kraft pulping, sodium hydroxide and sulphide are used for pulping, forms dark brown colour due to lignosulphonics, resin acid and phenols. The lignocellulosic components of pulp and paper mill effluent may be extracted, degraded by microorganisms, and converted to ethanol and biodiesel. However, lignin content hinders degradation and bioconversion processes for production of biofuels. Various physiochemical methods like use of acids to precipitate lignin are in use, however, they are inefficient, costly and produce large amount of sludge. Lignin-degrading microorganism may be applied after optimization of processes for removal of toxic compounds and production of biofuels. It is important to isolate and characterize appropriate microorganisms for degradation of chemical compounds hinders the saccharification processes and further fermentation for biofuel production. The desired microorganisms should have a high growth rate, high lignocellulose degradation ability, high tolerance during fermentation processes, low operation cost and rich in valuable components in their biomass.