Labor invests $1.1bn to boost low-carbon liquid fuel production

Tuesday 16 September 2025 - 14:30

By: Sahili Aya

Labor invests $1.1bn to boost low-carbon liquid fuel production

The Australian government has announced a $1.1bn grants program to accelerate the domestic production of low-carbon liquid fuels, aiming to cut emissions from some of the most polluting sectors of the economy.

The initiative, unveiled by Treasurer Jim Chalmers and Climate Change Minister Chris Bowen, will support projects to produce renewable diesel and sustainable aviation fuel from feedstocks such as canola, sorghum, and sugar. These alternatives are seen as critical to reducing emissions from aviation, shipping, and heavy freight — sectors considered “hard to abate.”

Liquid fuels account for nearly a third of Australia’s total emissions. By investing in cleaner alternatives, the government hopes to align with its forthcoming 2035 emissions reduction target and strengthen its path toward net zero.

Officials argue the program is not only about climate action but also about economic growth. A recent report estimated Australia could build a $36bn low-carbon fuel industry by 2050, with the potential to reduce emissions by 230 million tonnes.

Industry groups, farmers, and clean energy advocates welcomed the announcement, highlighting the potential to create regional jobs, expand farm businesses, and position Australia as a global leader in the energy transition.