The use of fossil fuels results in significant carbon dioxide emissions. Biofuels have been increasingly adopted as sustainable alternatives to fossil fuel to address this environmental issue. Integrating petroleum refineries into biofuel supply chains is an effective approach to mitigating greenhouse gas emissions and improving environmental sustainability. In this study, an integrated supply chain optimization framework was established, considering the carbon trade policy. In addition, a mixed-integer nonlinear programming model was developed to optimize the selection of biomass suppliers, construction of pretreatment plants and biorefineries, integration of petroleum refineries, and selection of transportation routes with the objective of minimizing the total annual cost. An example is presented to illustrate the applicability of the model. The optimization results show that integrating petroleum refineries into biofuel supply chains effectively mitigates carbon emissions. Carbon trade policies can have a direct impact on the total annual cost and carbon emissions of the supply chain.