The Albanese Government has announced a $1.1 billion investment to support the growth of Australia’s low carbon liquid fuel industry, aiming to capitalise on the country’s renewable resources and position itself as a leader in global net zero supply chains.
The funding, which forms part of the newly launched ten-year Cleaner Fuels Program, will encourage private investment in domestic production of renewable diesel, sustainable aviation fuel, and other low carbon liquid fuels. These fuels are expected to play a pivotal role in decarbonising hard-to-abate sectors such as air travel, shipping, and heavy road transport.
The government estimates that the first production of “drop-in” cleaner fuels—fuels that can directly replace existing ones without modifications—will begin by 2029. The initiative aligns with Australia’s broader climate and industrial goals to transition to cleaner energy while creating new jobs and boosting economic opportunities.
Leveraging Australia’s Strengths
Australia’s abundant feedstocks—including canola, sorghum, sugar, and agricultural waste—along with access to reliable and low-cost renewable energy, position the country to become a global hub for clean fuel production. Liquid fuels account for nearly half of Australia’s national energy consumption, and replacing fossil fuels with sustainable alternatives could yield substantial climate and economic benefits.
According to the Clean Energy Finance Corporation (CEFC), Australia currently exports nearly $4 billion worth of feedstocks like canola and tallow. By 2050, the low carbon liquid fuel industry could be worth up to $36 billion, underscoring the significant untapped potential in refining and value-adding locally.
Government Support and Industry Engagement
The Cleaner Fuels Program will be rolled out through competitive grants to ensure value for taxpayer funds, with eligibility criteria to be finalised following public consultation and policy design work this financial year. The program builds on existing government initiatives, including the Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund, and complements the National Bioenergy Feedstock Strategy under development.
Additionally, the government is expanding the Guarantee of Origin Scheme to include low carbon fuels and has introduced fuel quality standards for renewable diesel.
Expected Impact
A CEFC report projects that a mature low carbon liquid fuel sector in Australia could reduce cumulative emissions by approximately 230 million tonnes of CO2 equivalent by 2050—equivalent to more than double the nation’s current annual transport emissions or the emissions from 86 million cars.
Government Leaders React
Treasurer Jim Chalmers emphasised the economic significance of the initiative, stating, “Low carbon liquid fuels are an enormous economic opportunity for Australia. It’s about making Australians and our economy big beneficiaries of the global net zero transformation.”
Minister for Climate Change and Energy Chris Bowen added, “Making cleaner fuels here, from Australian feedstocks, creates the path for emissions reduction in sectors that are hardest to clean up, like plane travel and construction machines.”
Acting Minister for Infrastructure, Transport, Regional Development and Local Government Murray Watt highlighted the growing demand for transport and the need for sustainable solutions. “We have the renewable feedstocks, access to clean energy and a strong agriculture base, all of which will allow us to develop this new industry, create new jobs and power how Australians move for decades to come.”
Minister for Agriculture, Fisheries and Forestry Julie Collins expressed support for regional communities and farmers. “Producing more low carbon liquid fuels right here in Australia won’t just benefit our fuel security and emissions reduction, it will support Australian farmers, foresters and our regions.”
A Path Toward Net Zero
The government’s investment represents a strategic move to harness Australia’s natural resources, create jobs across regional areas, and strengthen energy security—all while supporting the global transition to net zero emissions.
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