The Albanese government will invest $1.1bn to drive local production of low-carbon liquid fuels under a new push to decarbonise hard-to-abate sectors that threaten its climate goals.
The government will on Wednesday announce a 10-year grants program to encourage private sector investment in on-shore production of lower-emissions fuels, such as so-called renewable diesel and sustainable aviation fuels.
The petrol alternatives – which are made from feedstock such as canola, sorghum and sugar – have long been touted as the solution to cut emissions in hard-to-abate sectors including aviation, cargo shipping and heavy road freight.
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The announcement comes ahead of the anticipated release of the federal government’s 2035 emissions reduction target and detailed pathways to decarbonise six sectors of the economy, including transport and agriculture.
It follows the release on Monday of the landmark national climate risk assessment report, which outlines the severe and far-reaching social and economic consequences of the climate crisis for Australia.
Liquid fuels account for roughly 32% of Australia’s total emissions, making the transition to a cleaner alternative critical to hitting net zero.
The treasurer, Jim Chalmers, and the climate change minister, Chris Bowen, will detail the new $1.1bn program at the Ampol refinery in Brisbane, promoting low-carbon liquid fuels as both a climate action and economic opportunity for Australia.
A July report from the Clean Energy Finance Corporation found Australia could develop a $36bn liquid fuels industry with the potential to reduce emissions by 230m tonnes by 2050.
That is equivalent to 2.3 times Australia’s annual transport emissions, according to the government.
“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,” Chalmers said.
Bowen said low-carbon fuels offer a path to cut emissions in sectors that are “hardest to clean up”.
“Across the nation we have 2bn 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,” he said.
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The $1.1bn funding will be provided under a competitive grants system, with eligibility details to be thrashed out later this financial year.
The announcement has been welcomed by the Low Carbon Fuels Alliance of Australia and New Zealand, a group of more than 300 stakeholders involved in the sector.
“For industry, this is more than a funding announcement – it is a turning point. It gives companies the confidence to invest, innovate and build here in Australia, using our enormous feedstock potential to build a clean energy future,” said Shahana McKenzie, the founder of the alliance and the chief executive of Bioenergy Australia.
“With demand for low-carbon liquid fuels rising both at home and abroad, this investment positions Australia to play a leading role in meeting that need.”
The National Farmers Federation’s interim chief executive, Su McCluskey, praised the “significant” investment.
“This isn’t just about cleaner fuels. It’s about creating jobs, diversifying farm businesses and ensuring our regions remain at the forefront of Australia’s transition to net zero,” she said.
