Australia is set to become a major global player in sustainable fuels, with the Federal Government investing AU$1.1 billion to accelerate the supply of low-carbon liquid fuels, to drive decarbonisation across the nation’s key industries.
The ground-breaking investment, announced by Australian Prime Minister Anthony Albanese on September 18, 2025, will turbo-charge Australia’s emerging low-carbon liquid fuels sector, strengthen the nation’s fuel security, and help position Australia at the forefront of the global clean energy transition.
Drawing on Australia’s vast agricultural base, the investment positions low-carbon liquid fuels as a key pillar of the government’s Net Zero strategy, enabling hard-to-abate sectors such as aviation, marine, manufacturing, transport, mining, and construction to reduce emissions without major disruption or high costs.
Welcomed by LCFAANZ
In a statement, the Low Carbon Fuels Alliance of Australia and New Zealand (LCFAANZ) has welcomed the announcement, which it says “represents a clear signal to the world that Australia is open for business in the development and deployment of low-carbon liquid fuels.”
Shahana McKenzie, founder of the LCFAANZ and CEO of Bioenergy Australia, said the announcement represented a “major breakthrough” in the building of Australia’s low-carbon liquid fuels industry, reinforcing the Albanese Government’s recognition of the pivotal role these fuels will play in achieving Net Zero.
This investment changes the game for Australia’s homegrown low-carbon fuel industry and our energy security. It sets the foundation for a cleaner, more resilient economy – supporting jobs, sparking innovation, and providing hard-to-abate sectors with the affordable, sustainable fuels they need to reach net zero. It sends a clear signal to global investors that Australia is open for business in the development and deployment of low-carbon fuels, Shahana McKenzie said.
Representing more than 300 stakeholders – from feedstock and fuel producers to project developers, customers, researchers, and all levels of government – the LCFAANZ believes Australia’s abundant feedstocks, established refining capability, and strong policy support create a unique opportunity for the nation to secure a leading role in the global low-carbon liquid fuels market.
For industry, this is more than a funding announcement – it is a turning point. It gives companies the confidence to invest, innovate, and build here in Australia, using our enormous feedstock potential to build a clean energy future. With demand for low-carbon liquid fuels rising both at home and abroad, this investment positions Australia to play a leading role in meeting that need, said Shahana McKenzie.
Developing conductive policy
The LCFAANZ has been working closely with the Albanese Government to drive policy that will attract the investment required to build a vibrant low-carbon liquid fuel industry.
The investment follows the release earlier this year of Bioenergy Australia’s “Securing our Fuel Future: Resilience Through Low Carbon Liquid Fuels“ report, which warned that Australia’s heavy reliance on imported fuel and shrinking domestic refining capacity left the nation increasingly exposed to global supply shocks and rising costs.
The report found that even with strong electrification, Australia will still need about 30 billion litres of liquid fuel by 2050, making low-carbon options such as sustainable aviation fuel (SAF), renewable diesel (RD), biodiesel, bio-methanol, and bio-ethanol essential to cut emissions, maintain competitiveness, and strengthen fuel security.
Unprecedented package of measures
The Federal Government’s announcement delivers an unprecedented package of measures, including the launch of a new ten-year Cleaner Fuels Program to attract investment for domestic fuel production, and funding that backs Australian innovation, from the farm to the fuel bowser.
These new measures build on existing initiatives, including the Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund – both requiring recipients to deliver benefits consistent with the Future Made in Australia Act’s community benefit principles – as well as the Government’s work to expand the Guarantee of Origin scheme to cover low-carbon liquid fuels and to establish a renewable diesel fuel quality standard.
This commitment signals to industry and investors that the Federal Government is serious about providing the foundation to decarbonise key sectors cost-effectively while maintaining global competitiveness. The LCFAANZ looks forward to working with the Australian Government on informing the details of this funding package through the public consultation and design work taking place this financial year, concluded Shahana McKenzie.
