Australia will invest $1.1 billion over the next decade to scale local production of renewable diesel and sustainable aviation fuel.
The funding aims to cut emissions in hard-to-abate transport sectors and reduce reliance on fossil imports.
The Cleaner Fuels Program will provide production-linked incentives to drive private investment in onshore refining capacity. First commercial volumes of “drop-in” fuels, compatible with existing engines and infrastructure, are expected by 2029.
Liquid fuels make up nearly half of Australia’s total energy consumption. Government modelling suggests a mature low-carbon liquid fuels industry could cut around 230 million tonnes of CO2-e by 2050 – equivalent to emissions from 86 million cars.
Australia currently exports almost $4 billion of feedstocks such as canola, sorghum, sugar and tallow. The Clean Energy Finance Corporation estimates that refining these locally could support a $36 billion domestic industry by mid-century.
“Low carbon liquid fuels are an enormous economic opportunity for Australia,” said Treasurer Jim Chalmers.
“It’s about making Australians and our economy big beneficiaries of the global net zero transformation.”
Energy Minister Chris Bowen highlighted the role of heavy transport and aviation.
“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,” he said.
According to Bowen, more than two billion litres of projects are already in the pipeline, awaiting scale-up. The new scheme builds on $250 million in earlier funding through the Future Made in Australia Innovation Fund.
Infrastructure Minister Murray Watt noted the importance for freight and passenger transport.
“As demand for air travel grows, and more goods are moved by road and rail, it’s essential we invest in future fuels that allow us to facilitate this increasing demand while meeting our net-zero targets,” he said.
Agriculture Minister Julie Collins said the initiative would provide new markets for primary producers.
“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,” she said.
Sydney Airport welcomed the announcement, calling it “a strong step towards building a local Sustainable Aviation Fuel (SAF) industry”.
CEO Scott Charlton said proposals such as a SAF refinery at Kurnell with pipeline access to the airport “present a readymade opportunity to help scale the SAF supply chain”.
Sydney Airport accounts for 40 per cent of national jet fuel use and has set a target for SAF to supply half its demand by 2050.
Consultation on program design and eligibility will begin this financial year, with grants to be awarded competitively.