Australia is gearing up to become a global force in low carbon liquid fuels (LCLFs).
New modelling indicates a potential $36 billion domestic market by 2050 – driven largely by the agricultural sector.
A recent report commissioned by the Clean Energy Finance Corporation (CEFC) outlines a blueprint for scaling a sovereign low carbon liquid fuel (LCLF) industry to support decarbonisation across hard-to-electrify sectors.
The study highlights that 56 billion litres of liquid fuels are consumed annually in Australia, accounting for around 32 per cent of national emissions.
Sectors like aviation, heavy freight, mining, rail, maritime and construction – many of which are resistant to electrification – will still require up to 30 billion litres by 2050, even under aggressive electrification scenarios.
LCLFs, produced from renewable biogenic feedstocks such as canola, sugarcane, animal fats and waste oils, offer a cleaner alternative to fossil fuels.
These drop-in fuels are compatible with existing infrastructure and deliver significant emissions reductions without the need for new vehicle or engine technologies.
Australia’s feedstock advantage is a key enabler.
CSIRO estimates biogenic resources could support up to 12.8 billion litres of LCLF production by 2050. Most notably, Hydroprocessed Esters and Fatty Acids (HEFA) and Alcohol-to-Jet (AtJ) pathways align well with Australia’s existing tallow, canola and sugar industries.
Despite global LCLF supply reaching 33 billion litres in 2024, Australia currently refines only 20 per cent of its fuel demand.
The report identifies over 2 billion litres of domestic LCLF production capacity already in the pipeline, with strong investor interest buoyed by Australia’s comparative feedstock advantage and proximity to Asia-Pacific demand.
Government support is growing, with $250 million earmarked under the Future Made in Australia policy, and state strategies emerging in NSW, Queensland and Western Australia.
However, the report stresses that stronger policy signals – such as blending mandates or long-term offtake agreements – are needed to bridge the cost gap with fossil fuels and de-risk private investment.
An accelerated policy scenario could see LCLFs abate up to 290 megatonnes of carbon dioxide equivalent (MtCO2-e) by 2050, bolstering emissions targets while enhancing fuel security and regional employment.
Without such action, Australia risks being left behind as global competitors scale production in response to aviation and shipping mandates.