Australia’s emerging low carbon liquid fuels industry is set to start producing ‘drop in’ alternatives to fossil fuels like sustainable aviation fuel and renewable diesel by the end of the decade with the help of $1.1 billion in grants from the Albanese government.
The grants will come from a new ten-year Cleaner Fuels Program announced Wednesday by Treasurer Jim Chalmers to stimulate private investment and onshore production of low carbon liquid fuels.
Aimed at seeding a new industry that could be worth $36 billion in 2050, the government investment also aligns with net zero targets and the strategic importance of a domestic supply for planes, trucks and cargo ships.
“Transport sector emissions are growing and will soon become the highest component of total national emissions. Diesel is the largest single source of energy demand in Australia today but is largely imported,” a CSIRO report backing the new domestic industry this year said.
The Albanese government made low carbon liquid fuels a priority under its Future Made in Australia agenda last year, tipping $250 million into its research and development.
The Cleaner Fuels Program announced Wednesday will offer up to $1.1 billion in competitive grants that are “production-linked”, with eligibility details to be developed through consultation this financial year.
But projects will need to align with the government’s community benefits principles for taxpayer support, like job creation and regional development.
“Developing this industry has potential to make us an indispensable part of growing global net zero supply chains,” Treasurer Jim Chalmers said.
“This is a downpayment on developing an entirely new industry in Australia.”
The government said it expects the new industry’s cleaner ‘drop in’ fossil fuel alternatives – which can be used in conventional engines – to begin production by 2029.
Around half of Australia’s energy use comes from liquid fuels and switching to the cleaner alternatives like sustainable aviation fuel or renewable diesel offers a huge climate and economic opportunity.
Australia already exports around $4 billion in potential feedstocks for clean fuels, like canola and tallow.
“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,” Climate Change and Energy minister Chris Bowen said.
“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. ”
The government’s guarantee of origin scheme – currently focused on green hydrogen provenance — is being expanded to include low carbon liquid fuels and has established a fuel quality standard for renewable diesel.
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