Cleaner fuels program puts local feedstocks at the centre of new industry
The federal government has announced a $1.1 billion Cleaner Fuels Program to support local production of renewable diesel and sustainable aviation fuel, aiming to cut emissions, strengthen fuel security, and create new regional opportunities.
An investment of $1.1 billion over the next decade has been committed by the federal government to establish a domestic low carbon liquid fuels industry in Australia.
The Cleaner Fuels Program will provide production-linked incentives to encourage onshore manufacturing of renewable diesel and sustainable aviation fuel. These fuels can be directly substituted for existing fuels and used in today’s engines, with the first commercial supply expected by 2029.
Australia is well placed to develop this industry, with feedstocks such as canola, sorghum, sugar and waste already available. The country exports almost $4 billion worth of these materials each year, yet most are processed overseas. The Clean Energy Finance Corporation estimates the local industry could reach a value of $36 billion by 2050.
Liquid fuels account for about half of Australia’s total energy use. Replacing them with cleaner alternatives would reduce reliance on fossil fuels while also strengthening energy security. A recent CEFC report suggests a mature industry could cut 230 million tonnes of emissions by mid-century — equal to the annual emissions from 86 million cars.
Minister for Climate Change and Energy Chris Bowen said the initiative would help tackle some of the hardest areas to decarbonise.
“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," Bowen said.
The program will also include a competitive grants process, with details on eligibility to be developed through consultation this financial year. Applicants will need to show community benefits in line with the Future Made in Australia Act.
Beyond direct funding, the government is expanding the Guarantee of Origin Scheme to cover low carbon liquid fuels and has already set a renewable diesel quality standard.
Regional communities and farmers are expected to benefit from stronger demand for crops and agricultural waste streams. The program will build on earlier support, including the $250 million allocated for research and development through the Future Made in Australia Innovation Fund.
Industry groups have welcomed the move. The NSW Powerfuels including Hydrogen Network (PFHN) said:
“We see this as a pivotal moment to align research, industry, and government efforts. PFHN will continue working with our partners to support innovation, demonstration projects, and policy dialogue that can maximise the impact of this initiative. Australia’s cleaner fuels journey is underway — and collaboration will be key to success.”
More details to come.
