In my November 2025 Prime Mover column, I reported that the Australian Government acknowledged the potential for a local Low Carbon Liquid Fuel (LCLF) industry and in their quarter three 2025 announcement, that government committed $1.1 billion to support the production of low carbon liquid fuels in Australia.
This is the recognition and commitment that had been long missing from the Australian LCLF decarbonisation pathway. In their announcement, the government detailed that locally produced LCLFs, such as renewable diesel and sustainable aviation fuel, can help reduce emissions in hard to abate industries and sectors.
When announcing their $1.1 billion funding, the government specifically detailed their target hard to abate industries include aviation, heavy road freight, rail, shipping and mining. Further, the announcement detailed that LCLFs can be produced sustainably from, waste products such as used cooking oil, agricultural and forest residuals, as well as biomass (garbage) by combining renewable hydrogen with captured carbon dioxide in these waste products. Stating that these fuels will play an important role to deliver on Australia’s Net Zero commitments.
The Cleaner Fuels Program will offer grants to domestic producers of LCLFs and will be designed to attract investment in LCLF projects in Australia. It will help projects to establish and compete with existing LCLF production overseas. Detailed design of the program is currently being finalised, following consultation with industry, with the program due to commence for opening applications for LCLF projects later in 2026-27.
While this was a much-welcomed government step in kick starting a low carbon liquid fuel industry, there was still a deal of hesitation by companies willing to invest in the Australian production of LCLFs, given that these fuels would generally be more expensive than the fossil based fuels that they would replace. In short, would these more expensive CO2 reducing fuels be embraced by vehicle operators?
That very question has not been lost on our federal government. While there has been much discussion and debate about the government’s planned tax reforms announced in the recent Federal Budget, that dialogue has very much overshadowed another very important announcement in the Budget regarding LCLFs, that address this question.
Quoting the Budget announcement: The Government will introduce a demand measure that provides certainty for new Australian low carbon liquid fuel production and stimulates investment in new, clean fuel refining capacity. (Budget Overview – Page 17). Australia is not unique, governments worldwide are creating strong demand for low-carbon fuels to meet
fuel security and decarbonisation targets. The USA uses federal and state blending requirements, specific percentages of LCLF in every gallon of liquid fuels. While Europe, UK, and Canada have similar blending mandates that use carbon credit systems. In Asia, policies are shifting from voluntary to mandatory measures.
India is rapidly moving toward 20% ethanol blending for petrol, and South Korea is raising its biodiesel mandate. These measures are building predictable demand for low carbon fuels in these regions. This is proving to be an essential foundation for building new refining capacity, supply chains and lowering costs over time.
The development of an Australian LCLF industry could deliver fuel security that is substantially missing here, in an ever volatile geopolitical world. The development of an Australian LCLF industry could deliver the decarbonisation of Australia’s hard-to-electrify sectors. A LCLF industry could deliver a significant economic benefit to Australian farmers and fuel producers. The Australian agriculture sector has a competitive advantage with our abundant feedstock resources to supply the Australian and global LCLF market.
The Truck Industry Council has been championing LCLFs as one of the solutions that is critical for fuel security and to decarbonising Australia’s heavy vehicle fleet for some time now. Along with the electrification of urban road freight and the use of higher productivity vehicle combinations, collectively these technologies will form the major pathways to decarbonisation of road freight in our country.
TIC applauds the Albanese government in acknowledging the role LCLFs can play in Australia’s decarbonisation journey and setting Australia to become a major global player of locally produced LCLFs. The previous announcement of $1.1 billion to develop a LCLF industry in Australia and now the government’s Budget announcement of demand side measures, will support the production of low carbon liquid fuels here. This is a major endorsement by the federal government of this decarbonisation pathway.
Tony McMullan
CEO, Truck Industry Council
Extracted in full from: https://primemovermag.com.au/tic-supports-governments-low-carbon-liquid-fuel-demand-side-measures/
