Low-carbon sustainable fuels are gaining traction in Formula 1, but Australia may struggle to bring these innovations to market due to production costs and policy gaps.

In short:

Formula 1 cars will be powered by sustainable fuels next year, lowering emissions and working with existing engines. 

Qantas imported almost 2 million litres this month, as demand for synthetic and bio-fuels picks up.

What’s next?

Australia is primed to cash in on the multi-billion-dollar manufacturing industry, but production will likely be exported overseas, where policies have driven demand.

From next year, F1 cars will use chemically synthesised fuels to reduce emissions. (AAP: James Ross)

When Formula 1 cars nudge speeds of 330 kilometres per hour next year, hundreds of millions will witness existing engines and infrastructure working with a fuel once considered futuristic.

The fuel burning inside the turbocharged V6 engines won’t be extracted from the Earth like traditional fossil fuels; instead, most will be chemically synthesised and involve recycling existing carbon dioxide, making it close to carbon neutral.

“It would reduce greenhouse gas emissions by 80 percent,” said Liam Parker, chief communications officer at Formula 1.

“The technical analysis shows zero drop in performance, so you’re racing green, providing a solution for the automotive sector and the wider consumer, but giving the public and the fans what they want.”

Five companies — many of them sponsors — will be supplying 100 percent synthetic and biofuel to the 11 teams on the grid, once again positioning Formula 1 as the breeding ground for the kind of innovation that trickles to road cars and other vehicles.

“This fuel can be relevant for consumers worldwide; it will be a ‘drop-in’ fuel that people could put in their vehicles.”

Mr Parker said.

Industry stakeholders believe these low-carbon liquid fuels provide a window of opportunity for Australia, claiming they can help connect the vehicles, ships, and planes of today to a net-zero tomorrow, and create a multi-billion-dollar domestic manufacturing industry that would also bolster the nation’s fuel security.

“We estimate the Australian low-carbon liquid fuel market could be in the order of $36 billion a year by 2050, and a feedstock market of about $15 billion,” said Rupert Maloney, executive director of the Clean Energy Finance Corporation (CEFC), a Commonwealth-funded investment firm backing green initiatives.

What makes synthetic and biofuels different?

There are two main types of low-carbon liquid fuels: synthetic and biofuel.

Both source carbon from the atmosphere when they’re being developed, effectively recycling it once an engine burns it.

However, whereas biofuel is processed from organic material such as sugarcane, used cooking oil, and sawmill residue, the latest synthetic fuel doesn’t affect food production.

It chemically synthesises the elements that make fuel: hydrogen and carbon.

The hydrogen is split from water in a process powered by renewable electricity, while the carbon is either captured from the air using emerging technology, extracted from algae, or gleaned from sustainable sources like waste.

The domestic biofuel industry is already growing as local feedstock is exported internationally, but industry stakeholders believe synthetic fuel has greater scale-up potential.

Global companies want to make synthetic fuel in Australia

At least two companies are considering manufacturing synthetic fuel in Australia — HIF (Highly Innovative Fuels) and Zero Petroleum — each expected to start plant construction in 2026.

HIF aims to produce 100 million litres of synthetic fuel annually once its manufacturing plant runs in 2030 — about 500 times more than its concept plant in Chile.

The company, which counts Porsche among its investors, claims it is spending about $2 billion constructing the plant in Tasmania.

“What we look for are locations where the feed stocks that we need to make this product are available and are also cost efficient,” said Ignacio Hernandez, chief executive of HIF Asia Pacific.

“One of the main ingredients we need is renewable energy, and Australia is well known globally for having a big renewable energy potential.”

Meanwhile, Zero Petroleum — founded by former F1 engineer Paddy Lowe and chemical engineer Nilay Shah — is examining the feasibility of building a plant in South Australia.

The facility would produce up to 10 million litres of synthetic aviation fuel, gasoline, and diesel annually.

It works with our cars today, but will we use it?

Low-carbon liquid fuels are often described as “drop-in” solutions, as they can work with existing petrol tankers, fuel bowsers, and internal combustion engines.

But there’s disagreement on whether the fuel would be used in Australia’s nearly 16 million passenger vehicles.

How much it costs at the bowser will be a key determinant.

“These fuels — and any kind of green product — you’re probably talking about two or three times the cost,”

HIF’s Mr Hernandez said.

A compromise can be found by blending synthetic fuel with the fossil equivalent, lowering emissions and making it more affordable.

“The cost of the product will come down, and eventually you’re able to transition to 100 percent synthetic without impacting the cost to the final consumer,” Mr Hernandez said.

A key factor in the price coming down is the cost of renewable electricity, as wind and solar farms would power the manufacturing process to keep the carbon footprint as low as possible.

“We need very low renewable energy costs to get that hydrogen price down,” Max Temminghoff said, Mineral Resources Lead at the CSIRO Futures.

“And then on the other flip side is the carbon dioxide. Pulling that out of the atmosphere is technologically not as mature and is a bit expensive, so that’s what the CSIRO is working on.”

Betting on electric vehicles and new infrastructure

Instead, there is a concerted effort to transition cars and the infrastructure powering them to electric, but there’s a long way to go to meet the CSIRO’s target of 97 per cent by 2050.

The latest data from the federal government, dated January 2024, reveals 15.7 million passenger vehicles registered in Australia.

One per cent — or 159,460 — were electric.

Vehicles powered by petrol or diesel comprised 95.5 per cent, or 14,958,462 cars.

“There will be an existing fleet of internal combustion engines, we think, still operating at that point [in 2050], and there needs to be a solution for those cars,” HIF’s Mr Hernandez said.

Sustainable fuel could be used in vehicles that are hard to electrify

The demand, policy, and money opportunities suggest synthetic fuel will power trucks driving interstate, ships travelling across oceans, and planes flying internationally.

“By 2050, about 30 billion litres in Australia will likely be hard to electrify and require low-carbon liquid fuels or other decarbonisation technologies,” the CEFC’s Mr Maloney said.

Some of these sectors have already transitioned from fossil to low-carbon liquid fuels.

Qantas imported 1.7 million litres of sustainable fuel in early May, hoping to blend it at a ratio of 18 per cent with traditional jet fuel.

The airline claims it could power the equivalent of 900 flights from Sydney to Auckland, reducing carbon emissions by 3,400 tonnes.

But it had to shop overseas, importing the biofuel from Malaysia.

“The creation of a domestic sustainable aviation fuel industry is key to our efforts towards the decarbonisation of aviation,” said Vanessa Hudson, the chief executive of Qantas Group.

Manufacturers say updated policy will drive investment

The federal government hopes to foster a low-carbon liquid fuel manufacturing industry in Australia, announcing $250 million in grants in March.

“Australia has the know-how and skills to meet the crucial task of decarbonising hard-to-abate sectors such as aviation, heavy transport and mining that rely on liquid fuels,” Climate Change and Energy Minister Chris Bowen said.

However, the industry is asking for regulations in other parts of the world, including mandates requiring select sectors to blend a percentage of synthetic fuel with their current fossil stock.

“Some of the mandates that are getting rolled out across Asia are in the order of 1 per cent blend, so it will not have a large impact on end-use pricing,” Mr Maloney said.

“It provides an investment signal back to the production side of the market to develop these facilities, bringing down the cost.”

HIF’s facility could produce enough synthetic fuel to meet a quarter of Tasmania’s demand, Mr Hernandez said, but it’ll likely export supplies to other countries instead.

“There are other markets in the world that have more advanced regulation to support the uptake of these products,” he said.

“We are hopeful that similar policies and regulations will come into play … and we can sell these e-fuels in Australia.”

According to federal government data, Australia relies on liquid fuels for more than half of its energy demand, but the number of local refineries has dwindled from seven to two.

The nation’s science agency believes making low-carbon liquid fuels domestically would help shore up the country’s energy security.

“Currently, we import about 80 per cent of our refined fuels, and we get those fuels through pretty extensive supply chains that are exposed to a range of geopolitical risks,” the CSIRO’s Mr Temminghoff said.

“Being able to produce our fuels locally means having more control over the variables that go into the price.

“We see this opportunity as fleeting.”

https://www.abc.net.au/news/2025-05-26/low-carbon-sustainable-fuel-headed-for-formula-one-qantas/105323712

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