The Australian Government has identified low carbon liquid fuels (LCLF) as a Future Made in Australia priority. We are working with industry on measures to drive LCLF investment and build domestic production.
LCLF present an opportunity to strengthen Australia’s fuel security and resilience. They can do this by reducing reliance on imported fuels while building a new domestic industry. This could unlock investment, create jobs and support economic growth, particularly in regional Australia.
LCLF can support Australia’s transition to a net zero economy. It can help reduce emissions in sectors that are difficult to electrify, including:
- aviation
- heavy transport
- mining
- agriculture
- defence.
The most common LCLF are:
- sustainable aviation fuel
- renewable diesel
- biodiesel
- ethanol
with e-fuels and other LCLF emerging.
In many applications, these fuels can be used in existing vehicles, equipment and fuel infrastructure. They can help reduce emissions alongside electrification and other technologies, while making use of existing assets and supply chains.
Designing the Demand mechanism
We have heard from the LCLF industry that supply-side support alone is unlikely to attract the scale of investment needed to grow domestic production., We are developing a demand mechanism to help overcome this barrier. By doing this, we can realise the fuel security, economic and emissions reductions benefits offered by LCLF.
The policy is intended to progressively increase the share of LCLF in Australia’s fuel mix over time. This will create a stronger and more predictable market for these fuels. As the market develops, the design of the mechanism will play an important role in:
- balancing investment certainty
- flexibility
- costs
- implementation considerations.
Have Your Say
The consultation paper outlines a potential policy framework and key design features for discussion. Feedback received through this consultation will help inform future government decisions on the design and implementation of the mechanism.
We welcome views on:
- the overall policy approach
- key design elements
- potential impacts, opportunities and challenges
- implementation considerations.
The consultation will be open until 15 September 2026.
Have Your Say: Securing Australia’s Cleaner Fuels Industry: Consultation paper on a demand mechanism
