Australia Promises $735 Million to Launch Biofuel Industry

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September 17, 2025

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by Peter Hobson (Reuters) The Australian government said on Wednesday (September 17, 2025) it would invest A$1.1 billion ($735 million) in the development of a low-carbon fuels industry, a move welcomed by farm groups, who hope it will boost demand for biofuel feedstocks like canola and sugarcane.

The money, to be released over 10 years from 2028, is intended to stimulate private investment in products like biodiesel and sustainable aviation fuel, the government said.

Australia is a major producer of crops such as canola, sugarcane, sorghum and tallow, that can be used to make fuel.
It currently exports the vast majority of those goods and imports most of its gasoline. Australian canola is a major feedstock for Europe's biodiesel industry. READ MORE

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Excerpt from Australian Minister for Infrastructure, Transport, Regional Development and Local Government: The Albanese Government is investing $1.1 billion to help unlock the vast economic opportunities on offer from low carbon liquid fuels.

This is all about helping to maximise the economic and industrial benefits of the shift to clean energy and net zero.

This investment will help ensure we have strong supply chains for the more sustainable fuels that can power our trucks, cargo ships and planes into the future.

The new ten-year Cleaner Fuels Program will stimulate private investment in Australian onshore production of low carbon liquid fuels, such as renewable diesel and sustainable aviation fuel.

The first production of ‘drop-in’ cleaner fuels, which can be directly substituted for existing fuels and work in today’s engines, is estimated by 2029.

Australia has the ingredients needed to make cleaner liquid alternatives to fossil fuels, with ready access to feedstocks like canola, sorghum, sugar and waste.

Thanks to our advanced farming practices and access to cheap and reliable renewable energy, Australia is in an enviable position to produce cleaner, low carbon liquid fuels that jets, ships, construction machines and heavy trucks need to reach net zero.

Liquid fuels make up around half of Australia’s national energy use. Replacing those fossil fuels with cleaner alternatives would deliver a massive climate and economic opportunity.

Australia already exports nearly $4 billion of suitable feedstocks like canola and tallow. But the Clean Energy Finance Corporation (CEFC) estimates an Australian low carbon liquid fuel industry could be worth $36 billion by 2050 – highlighting the untapped potential of developing local refining and value-adding capability.

Funding to make cleaner fuel on Australian shores, from Australian feedstock will help back Australian innovators from the farmer to the fuel bowser, make our fuel supply greener and more resilient and make low carbon fuels available for early adopters.

Details about eligibility will be considered through public consultation and design work to take place this financial year. Grants will be awarded through a competitive process to ensure we get value for taxpayer funds.

The new production-linked incentive builds on the Government’s support through the Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund. Recipients will also need to deliver benefits according to the community benefit principles under the Future Made in Australia Act.

The Government is also supporting the market by expanding the Guarantee of Origin Scheme to include low carbon liquid fuels and has established a fuel quality standard for renewable diesel.

A recent report from the CEFC found that a mature Australian low carbon liquid fuels industry could deliver around 230 million tonnes CO2-e in cumulative emissions reduction by 2050. This is equivalent to 2.3 times Australia’s current annual transport emissions, or the annual emissions from 86 million cars.

Quotes attributable to the Treasurer Jim Chalmers:

“Low carbon liquid fuels are an enormous economic opportunity for Australia.

“It’s about making Australians and our economy big beneficiaries of the global net zero transformation.

“Developing this industry has potential to make us an indispensable part of growing global net zero supply chains.

“This is a downpayment on developing an entirely new industry in Australia.

“From the farm to the refinery, from primary production to processing, this will create more jobs and more opportunities for Australian workers and businesses.

“It’s another way we’re helping Australians grasp the big benefits on offer in the transformation to cleaner and cheaper energy – to help lift wages, grow living standards, create jobs and grow our economy.”

Quotes attributable to Minister for Climate Change and Energy Chris Bowen:

“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.

“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.”

Quotes attributable to Acting Minister for Infrastructure, Transport, Regional Development and Local Government Murray Watt:

“As demand for air travel grows, and more goods are moved by road and rail, it’s essential we invest in future fuels that allow us to facilitate this increasing demand while meeting our net-zero targets.

“Low carbon fuels have the potential to be a $36 billion industry here in Australia, and we have the opportunity to lead the way on the production of these new fuels.

“We have the renewable feedstocks, access to clean energy and a strong agriculture base, all of which will allow us to develop this new industry, create new jobs and power how Australians move for decades to come.”

Quotes attributable to Minister for Agriculture, Fisheries and Forestry Julie Collins:

“We’re committed to unlocking more opportunities to harness our feedstocks, which is why this investment is great news for our farmers and our regional communities.

“Producing more low carbon liquid fuels right here in Australia won’t just benefit our fuel security and emissions reduction, it will support Australian farmers, foresters and our regions.

“Our farmers and foresters have always been innovators and our Government is putting their expertise and world-class production practices at the centre of growing Australia’s low carbon liquid fuel industry.

“This investment will complement our National Bioenergy Feedstock Strategy – which we are developing so our agricultural sector can seize the economic opportunities that come with feedstocks.” READ MORE

Excerpt from Newswire/Yahoo!: The Low Carbon Fuels Alliance of Australia and New Zealand, which represents 300 stakeholders including farmers, researches to customers said the domestic production of low-carbon liquid fuel would reduce Australia’s reliance on imported alternatives.

Alliance founder and Bioenergy Australia chief Shahana McKenzie said it was a “turning point” for the burgeoning industry.

“It sends a clear signal to global investors that Australia is open for business in the development and deployment of low carbon fuels,” she said.

“With our vast agricultural and industrial base, CSIRO reports that by 2025 Australia will have enough feedstock to replace 60 per cent of local jet fuel with SAF, growing to 90 per cent by 2050.”

National Farmers Federation’s interim chief executive Su McCluskey said creating a “strong domestic biofuels industry” would also create extra business opportunities for producers.

“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.

The move comes as Labor is days away from handing down its 2035 emissions reduction target, with the figure expected to be between 65 to 75 per cent.

The figure will build on the 2030 target which states Australia must reduce emissions by 43 per cent of 2005 levels, before it hits net zero emissions by 2050.

During an inquiry into the doomsday Climate Risk Assessment treasury officials confirmed they had been asked, prior to the election, to model just one figure for the 2035 emissions reduction target, however, they would not share the figure.

This comes after a report by the Australian Climate Service released on Friday said extreme weather events would result in a $571bn blow to property values by 2030, with that figure growing to $611bn by 2050.

Heat-related deaths are also set to spike. READ MORE