Intro:

The Australian federal government has unveiled a landmark A$1.1 billion investment to accelerate domestic low-carbon liquid fuel production through a new Cleaner Fuels Program. This initiative aims to unlock private capital, strengthen supply chains, and establish Australia’s role in next-generation drop-in fuels like renewable diesel, sustainable aviation fuel (SAF), and e-fuels. 

Key Features & Strategic Importance

• The program will span 10 years, offering production-linked grants designed to incentivize the onshore production of cleaner fuels from Australian feedstocks, including canola, sorghum, sugar, and waste. 

• The first “drop-in” cleaner fuels (fuels compatible with existing engines and infrastructure) are scheduled to enter the market by 2029. 

• To support the program, the government is expanding the Guarantee of Origin Scheme to include low-carbon liquid fuels and establishing new fuel quality standards for renewable diesel. 

• According to projections from the Clean Energy Finance Corporation, a mature domestic low-carbon liquid fuel industry could be worth A$36 billion by 2050, with the potential to avoid 230 million tonnes CO₂-e cumulatively. 

• The funding will be distributed via a competitive grants process, with public consultation on eligibility and design expected in the coming year. 

This program represents a strategic pivot for Australia, targeting the decarbonization of hard-to-abate sectors (aviation, heavy freight, and shipping) while catalyzing synergies across agriculture, industry, and energy.

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17 September 2025

Treasurer, the Hon Jim Chalmers MP
Minister for Climate Change and Energy, the Hon Chris Bowen MP
Acting Minister for Infrastructure, Transport, Regional Development and Local Government and Senator for Queensland, Senator the Hon Murray Watt
Minister for Agriculture, Fisheries and Forestry, the Hon Julie Collins MP

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The Albanese Government is investing $1.1 billion to help unlock the vast economic opportunities offered by 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 produce cleaner liquid alternatives to fossil fuels, with ready access to feedstocks such as canola, sorghum, sugar, and waste.  

Thanks to our advanced farming practices and access to affordable and reliable renewable energy, Australia is well-positioned 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 worth of suitable feedstocks, such as canola and tallow. However, the Clean Energy Finance Corporation (CEFC) estimates that 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 capabilities.  

Funding to produce cleaner fuel on Australian shores from Australian feedstock will support Australian innovators, from farmers to fuel bowser operators, in making our fuel supply greener and more resilient, and in making low-carbon fuels available to early adopters. 

Details about eligibility will be considered through public consultation and design work, which will 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 in accordance with the community benefit principles outlined in 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 the potential to make us an indispensable part of growing global net zero supply chains. 

“This is a down payment 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 excellent 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.”  

Learn more:

• Tire Pyrolysis Project
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• Tyre Pyrolysis Guide
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• Tire Pyrolysis Plant Setup

Seize Australia’s Cleaner Fuel Opportunity with Klean’s Strategic Insight

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Australia’s Cleaner Fuels Program is a turning point. Klean Industries brings domain expertise in fuel pathway modeling, project design, and credit strategies to help you ride the wave, not get swept aside.

Klean’s Clean Fuel Strategy Capabilities:

✅ Pathway & Tech Validation for Drop-In Fuel Projects
✅ Feedstock & Supply Chain Design (agriculture, waste, biomass)
✅ Policy & Incentive Navigation, Grant Strategy Support
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✅ End-to-End Advisory: Feasibility → Engineering → Offtake Strategy

With Klean’s multi-domain experience and track record, your clean fuels venture in Australia can lead, not follow.

Ready to explore low-carbon liquid fuel projects in Australia?

Talk to a Klean Industries Expert for Sustainable Fuel Product Opportunities in Australia » GO.