Shrimp shell waste is a significant environmental challenge and an underutilized resource in Indonesia's coastal areas. This study proposes an innovative approach to processing shrimp shell waste into chitosan-based bioadditives using chemical hydrolysis technology. The resulting chitosan functions as an environmentally friendly additive for biofuels, capable of improving combustion efficiency and fuel stability in small-scale fishing vessels. The extraction process includes deproteinization, demineralization, and deacetylation stages to obtain high-quality chitosan with a deacetylation degree exceeding 85%. Field implementation through a four-stage pilot project demonstrated the feasibility of small-scale chitosan production using simple hydrolysis equipment. Adding chitosan as a bioadditive to biodiesel has the potential to reduce fishermen's dependence on fossil fuels, mitigate fisheries waste pollution, and support the transition to renewable energy. This innovation aligns with the Sustainable Development Goals (SDGs), particularly Goal 7 (Affordable and Clean Energy) and Goal 12 (Responsible Consumption and Production), by promoting circular economy principles and empowering coastal communities. Further research is recommended to optimize the bioconversion process and evaluate long-term economic and environmental impacts.