Most of the anthropogenic emissions of carbon dioxide result from the combustion of fossil fuels for energy production. Photosynthesis has long been recognized as a means, at least in theory, to sequester anthropogenic carbon dioxide. Aquatic microalgae have been identified as fast growing species whose carbon fixing rates are higher than those of land-based plants by one order of magnitude. Physical Sciences Inc. (PSI), Aquasearch, and the Hawaii Natural Energy Institute at the University of Hawaii are jointly developing technologies for recovery and sequestration of CO{sub 2} from stationary combustion systems by photosynthesis of microalgae. The research is aimed primarily at demonstrating the ability of selected species of microalgae to effectively fix carbon from typical power plant exhaust gases. This report covers the reporting period 1 October to 31 December 2004 in which PSI, Aquasearch and University of Hawaii conducted their tasks. Based on the work during the previous reporting period, Aquasearch run the first set of experiments with actual coal combustion gases with two different strains of microalgae. In addition further, full scale carbon sequestration tests with propane combustion gases were conducted. Aquasearch continued testing modifications to the coal combustor to allow for longer-term burns.