Australia to invest $1.1 billion to unlock low carbon liquid fuels for jets, ships and machines

The Australian federal government says it will invest $1.1 billion as part of a new ten-year Cleaner Fuels Program to stimulate private investment low carbon liquid fuels such as renewable diesel and sustainable aviation fuel (SAF).

Billed as an effort to “unlock the vast economic opportunities on offer from low carbon liquid fuels”, the government believes its new Cleaner Fuels Program will help jump Australia to the forefront of an industry that will support the net zero ambitions of a wide array of transport users.

According to the government, first production of so-called “drop-in” low carbon fuels – ie, fuels which can be directly substituted for existing fuels and work in today’s engines – is estimated to be in 2029.

It says Australia is well positioned to make clean, low carbon liquid fuels that can cut emissions for jets, ships, construction machines, and heavy trucks, due to its advanced farming practices, ready access to feedstocks like canola, sorghum, sugar, and waste, cheap and reliable renewable energy.

Sustainable fuels are proposed for those parts of the transport chain that cannot be easily electrified. This includes jets, ships, construction machines, and – in some cases – heavy trucks.

“The global net zero transformation is an enormous economic opportunity for Australia and producing low carbon liquid fuels is an important part of that opportunity,” treasurer Jim Chalmbers said in a statement.

“Becoming a world leading producer of low carbon liquid fuels is a really big chance for Australia to be part of a really important growing global supply chain.”

Liquid fuels currently account for around half of Australia’s national energy use, so the government believes replacing fossil fuel-based liquid fuels with cleaner alternatives could have a dramatic impact on its emissions targets, and will present economic opportunities.

Australia already exports nearly $4 billion worth of suitable feedstocks like canola and tallow. But according to the Clean Energy Finance Corporation (CEFC), an Australian based low carbon liquid fuel industry could be worth as much as $36 billion by the middle of the century.

“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,” said Chris Bowen, federal minister for climate change and energy.

“Across the nation we have 2 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.” 

The funding to set up the new Cleaner Fuels Program – not to be confused with the program of the same name that was legislated in 2001 for implementation in 2006 – is aimed at backing Australian innovators in making a greener fuel supply, paving the way for low carbon fuels to be made available to early adopters.

Further details about eligibility will be considered through public consultation and design work to take place through the remainder of this financial year, with grants to be awarded through a competitive process.

Recipients of those grants will also need to deliver benefits according to the community benefit principles under the Future Made in Australia Act. 

This new production-linked incentive builds on support provided by the federal government through its Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund.

Want the latest clean energy news delivered straight to your inbox? Join more than 26,000 others and subscribe to our free daily newsletter.