The Australian Government is investing $1.1 billion to help unlock the economic opportunities on offer from low carbon liquid fuels.

The funding will help maximise the economic and industrial benefits of the shift to clean energy and net zero.

The investment will also ensure strong supply chains for the more sustainable fuels that can power trucks, cargo ships and planes into the future.

The new 10-year Cleaner Fuels Program will stimulate private investment in Australian onshore production of low carbon liquid fuels, such as renewable diesel and sustainable aviation fuel.

The first production of ‘drop-in’ cleaner fuels, which can be directly substituted for existing fuels and work in today’s engines, is estimated by 2029.

Australia has the ingredients needed to make cleaner liquid alternatives to fossil fuels, with ready access to feedstocks like canola, sorghum, sugar and waste.

Thanks to our advanced farming practices and access to cheap and reliable renewable energy, Australia is in a prime position to produce cleaner, low carbon liquid fuels that jets, ships, construction machines and heavy trucks need to reach net zero.

Liquid fuels make up around half of Australia’s national energy use. Replacing those fossil fuels with cleaner alternatives would deliver a massive climate and economic opportunity.

Australia already exports nearly $4 billion of suitable feedstocks like canola and tallow. But the Clean Energy Finance Corporation (CEFC) estimates an Australian low carbon liquid fuel industry could be worth $36 billion by 2050 – highlighting the untapped potential of developing local refining and value-adding capability.

Funding to make cleaner fuel on Australian shores, from Australian feedstock will help back Australian innovators from the farmer to the fuel bowser, make our fuel supply greener and more resilient and make low carbon fuels available for early adopters.

Details about eligibility will be considered through public consultation and design work to take place this financial year. Grants will be awarded through a competitive process to ensure we get value for taxpayer funds.

The new production-linked incentive builds on the Government’s support through the Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund. Recipients will also need to deliver benefits according to the community benefit principles under the Future Made in Australia Act.

The Government is also supporting the market by expanding the Guarantee of Origin Scheme to include low carbon liquid fuels and has established a fuel quality standard for renewable diesel.

A recent report from the CEFC found that a mature Australian low carbon liquid fuels industry could deliver around 230 million tonnes CO2-e in cumulative emissions reduction by 2050. This is equivalent to 2.3 times Australia’s current annual transport emissions, or the annual emissions from 86 million cars.

Treasurer Jim Chalmers said: “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.

“Developing this industry has potential to make us an indispensable part of growing global net zero supply chains.

“This is a down payment on developing an entirely new industry in Australia.

“From the farm to the refinery, from primary production to processing, this will create more jobs and more opportunities for Australian workers and businesses.

“It’s another way we’re helping Australians grasp the big benefits on offer in the transformation to cleaner and cheaper energy – to help lift wages, grow living standards, create jobs and grow our economy.”

Minister for Climate Change and Energy Chris Bowen said: “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.

“Across the nation we have two billion litres worth of projects in the pipeline, many of which are ready to scale up production. A new thriving domestic industry with more jobs in our regions, from farmers growing the inputs to workers refining the fuels of the future is within our reach.

“$1.1 billion for low carbon liquid fuels production here in Australia builds on the $250 million we have already allocated to low carbon liquid fuels research and development through the Future Made in Australia Innovation Fund.”

Sydney Airport welcomes low carbon liquid fuels investment

Sydney Airport has welcomed the Australian Government’s investment in low-carbon liquid fuels.

It said the package representing a strong step towards building a local Sustainable Aviation Fuel (SAF) industry.

Scott Charlton, Sydney Airport CEO said: “This announcement sends a clear signal to industry and investors that Australia is serious about decarbonising aviation, and we commend the Albanese Government for its leadership.

“This investment will create momentum for private investment. Proposals like the development of a SAF refinery at Kurnell, with its existing pipeline access to Sydney Airport, present a readymade opportunity to help scale the SAF supply chain and support the decarbonisation of aviation.

“This funding is an important and welcome step, and we look forward to working with government and all industry stakeholders to turn policy into projects that could help create a resilient domestic SAF industry.”

Sydney Airport accounts for approximately 40 per cent of Australia’s total annual aviation fuel uplift and has an ambition for 50 per cent of this to be SAF by 2050.