The Australian government is committing AU$1.1 billion to a new 10-year Clean Fuels Program to boost domestic production of low-carbon liquid fuels like renewable diesel and sustainable aviation fuel.
In a landmark move to accelerate the nation’s transition to a low-carbon economy, the Australian government on September 17 announced a significant investment of AU$1.1 billion ($731.84 million) into the domestic production of low-carbon liquid fuels. The funding, which will be distributed through a new 10-year competitive grants scheme called the Clean Fuels Program, aims to stimulate onshore investment and build robust supply chains for fuels such as renewable diesel and sustainable aviation fuel (SAF).
The announcement positions Australia to become a key player in the global net-zero transformation, a market that the government believes could be worth up to $36 billion to the Australian economy. The investment is specifically targeted at reducing emissions in 'hard-to-abate' sectors like aviation, heavy-duty freight, and mining, which are difficult to electrify.
Australia is uniquely positioned to lead in this emerging industry, thanks to its extensive agricultural sector and a growing supply of affordable and reliable renewable energy. The nation currently exports nearly $4 billion in suitable feedstocks, including canola (rapeseed) and tallow, with other promising sources like sugar, sorghum, and various waste products offering significant potential for domestic conversion into clean fuels.
This new production-linked incentive is not an isolated policy but rather a strategic expansion of previous government commitments. It builds on support already provided through the Sustainable Aviation Fuel Funding Initiative and the Future Made in Australia Innovation Fund, which has already allocated $250 million to low-carbon liquid fuels research and development. The new program will also require grant recipients to adhere to the community benefit principles outlined in the Future Made in Australia Act, ensuring that new projects deliver tangible benefits to local communities.
The Program will offer competitive grants to private sector companies to encourage the establishment of onshore production facilities. The government has confirmed that the detailed design and eligibility criteria for the program are currently being developed through a public consultation process and are expected to be finalized during the current financial year, which ends on June 30, 2026. This process will pave the way for applications to open in the 2026-27 financial year.
By investing in this sector, Australia is not only taking a critical step toward its own net-zero goals but is also aiming to become an indispensable part of global clean energy supply chains.
