Australia unveils $1.1 billion plan to replace petrol with low-carbon fuels

Australia's government on Wednesday unveiled a ten-year Cleaner Fuels Program backed by A$1.1 billion, aiming to replace petrol and diesel with low-carbon liquid fuels produced largely from domestic feedstocks such as canola. Officials say the plan is designed to spur a new Australian industry while cutting emissions in hard-to-decarbonize sectors.

The program will focus on maximizing the economic and industrial benefits of moving to cleaner energy, with an emphasis on onshore production that could attract private investment. It would also explore the potential of low-carbon liquids, including renewable diesel and sustainable aviation fuel. The first fuels that can be used directly in existing engines are not expected until 2029.

Finance Minister Jim Chalmers framed the plan as a step toward a larger domestic industry and a share of the growing global net-zero supply chain. He described the program as a down payment on developing an entirely new industry in Australia and a way to lift wages, improve living standards, create jobs and grow the economy.

Climate Change and Energy Minister Chris Bowen said the low-carbon liquids could reduce emissions in hard-to-decarbonize sectors such as aviation and construction machinery, and that the program would generate hundreds of jobs and opportunities for regional businesses. Bowen noted a domestic industry could grow from regional inputs to refined fuels.

The government argues Australia already has the ingredients to make cleaner liquid fuels, pointing to ready access to feedstocks such as canola, sorghum, sugar and waste. It notes that liquid fuels already account for about half of the nation's energy use.

The plan would replace current fossil fuel use with cleaner alternatives, helping the country shift toward cleaner energy as it pursues a net-zero target.

Australia already exports almost $4 billion worth of suitable feedstocks such as canola and tallow, and a Clean Energy Finance Corporation assessment projects a domestic low-carbon liquid fuel industry could be worth as much as $36 billion by 2050.

Funding would be provided to Australian innovators, from farmers to fuel station operators, with eligibility and design details to be determined through public consultation later this financial year.

Context: The proposal aligns with the government's net-zero by 2050 target and the broader push toward cleaner energy as part of a wider climate and energy strategy.

Officials described the policy as a down payment on an entirely new Australian industry, intended to lift wages, living standards and regional employment while expanding the economy.