The Australian government has announced a landmark AU$1.1 billion investment to jump-start domestic production of low-carbon liquid fuels (LCLF) through a new ten-year Cleaner Fuels Program. This initiative aims to strengthen supply chains for renewable diesel, sustainable aviation fuels (SAFs), and e-fuels, especially in sectors where electrification is difficult. 

Section 1: Program Features & Strategic Rationale
The government intends to design the incentive structure through public consultation in late 2025, with detailed rules to be finalized by mid-2026, and applications to open in the 2026-27 financial year. 

Key features include:

• Production-linked grants for domestic producers of LCLF (e.g., renewable diesel, SAFs, e-fuels) to help close the competitiveness gap with international supply. 

• “Drop-in” fuels that can be used in existing engines and infrastructure by ~2029. 

• Expansion of the Guarantee of Origin Scheme to include LCLF, and establishment of new fuel quality standards for renewable diesel. 

• Intent to build on existing programs (e.g., Sustainable Aviation Fuel Funding Initiative, Future Made in Australia Innovation Fund) to create synergy and capacity. 

• Market estimates suggest that a mature domestic LCLF industry could be worth AU$36 billion by 2050, with cumulative CO₂ savings of around 230 million tonnes. 

• The program targets hard-to-abate sectors: aviation, heavy freight, mining, and shipping. 

This policy marks a bold step by Australia to reduce fossil fuel dependence, mobilize industrial investment, support farmers and feedstock producers, and secure a leading role in the global clean fuels transition.

The Australian government announced plans on September 17 to invest AU$1.1 billion ($731.84 million) in supporting the domestic production of drop-in, low-carbon liquid fuels, including renewable diesel and sustainable aviation fuel (SAF). 

The funding will be offered in the form of competitive grants available through a new 10-year Clean Fuels Program. According to the government, details regarding eligibility will be considered through a public consultation process and design work, which is expected to take place during the current financial year, beginning July 1, 2025, and concluding on June 30, 2026.

The investment aims to stimulate investment in Australian onshore production of low-carbon liquid fuels and ensure the development of strong supply chains.  

Australia currently exports nearly $4 billion in suitable feedstocks, such as canola and tallow. Sugar, sorghum, and waste feedstocks also offer significant potential for the domestic production of low-carbon fuels. According to the government, Australia’s advanced farming practices and access to cheap and reliable renewable energy make the country well-positioned to produce low-carbon liquid fuels. 

 The new production-linked incentive builds on support offered 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 stated that it 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 full copy of the announcement is available on the Australian Government website.

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Lead Australia’s Cleaner Fuel Future with Klean’s Strategic Insight

Industrial Vision. Fuel Innovation. One Partner That Guides You Beyond Policy.

Australia’s push for cleaner fuels is a turning point. Klean Industries brings domain expertise across pathway design, project evaluation, carbon strategy, and implementation to help you transform opportunity into leadership.

Klean’s Clean Fuel Capabilities:

✅ Technical & Economic Validation of Drop-In Fuel Projects
✅ Feedstock Strategy & Supply Chain Design (biomass, waste)
✅ Incentive & Grant Preparation Support
✅ Offtake Modeling & Market Positioning
✅ End-to-End Advisory: Feasibility → Engineering → Execution

With Klean’s cross-domain footprint and proven track record, your project in Australia can shape the future, not just ride the wave.

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

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