Australia has a $36 billion opportunity to become a world leader in low-carbon liquid fuel (LCLF) technology and production, slash emissions by 230 million tonnes by 2050, and reduce its heavy reliance on imported fuels.
However, it must move quickly to seize the advantage, according to a new landmark report from the Clean Energy Finance Corporation (CEFC) and Deloitte.
Refined Ambitions: Exploring Australia’s Low Carbon Liquid Fuel Potential, the report released Tuesday, finds that LCLFs are essential to achieving net-zero goals for industries that are exceptionally difficult to electrify, particularly aviation, mining, heavy freight, and defence.
The report’s findings point to both immense market and environmental potential, as well as urgent structural challenges to overcome.
CEFC CEO Ian Learmonth emphasised the immediate role for clean fuels across Australia’s hardest-to-abate sectors.
“Low carbon liquid fuels are a present-day necessity for sectors that can’t electrify. If we get the settings right, Australia can lead in clean fuels innovation and production – not just supply the feedstocks,” Learmonth said.
“Australia has all the ingredients to be a clean fuel superpower – abundant feedstocks, world-class research, and growing demand.
“Policy accelerators, including mandates, certification schemes and offsets, are key components to assist the industry reach scale.
“The first movers will reap the rewards of this global market.”
The report highlights a domestic LCLF industry could contribute $36 billion annually to the economy by 2050, significantly boosting both national growth and positioning Australia as a bullish clean energy exporter.
Climate benefits loom large: the industry could deliver cumulative abatement of 230 million tonnes of CO₂e over the next 25 years, roughly half of Australia’s yearly emissions.
However, the nation’s ongoing fuel imports pose a strategic threat.
Australia imported 80 per cent of its liquid fuel in 2023 – at a cost of $50.7 billion – leaving it exposed to global supply chain shocks.
At the same time, Australia exports $3.9 billion in LCLF feedstocks such as canola and tallow, yet lacks sufficient domestic refining capacity to extract maximum value from these resources.
Even under rapid electrification scenarios, the report forecasts large-scale liquid fuel demand will persist through 2050.
CSIRO modelling cited within the report demonstrates Australia could produce billions of litres of LCLFs through 2050, utilising existing agricultural land and practices without compromising food production.
The call to action aligns with the federal government’s Future Made in Australia agenda, positioning LCLFs at the heart of sovereign capability, regional job creation, and emissions reduction.
CEFC Executive Director Rupert Maloney said: “We export the raw materials but miss the opportunity to build the industry here at home.
“This is about regional development, national resilience, and emissions reduction, all at once.”
Despite growing industry momentum and a pipeline exceeding two billion litres of proposed LCLF projects, the sector faces high costs, a lack of national policy mandates, and persistent regulatory and financial hurdles.
LCLFs are still more expensive to produce than fossil fuels without government policy support, sidelining investor confidence and stalling demand.
Next-generation fuel technologies — like Fischer-Tropsch and synthetic e-fuels — also require substantial research and commercial “de-risking” before viable, large-scale rollout.
The report stresses that: “By introducing targeted policies, such as mandates, national procurement programs and low carbon fuel certification, Australia can provide the demand certainty and price signals needed to scale a local clean fuel industry.”
To close the gap between potential and reality, the report unveils a seven-step roadmap designed to catalyse an Australian LCLF industry.
These steps include improving market access via better trade ties, de-risking investments through concessional finance, standardising contract terms, establishing credible demand signals such as fuel blending mandates, increasing transparency on demand and supply data, fostering cost-reducing innovation in advanced fuels, and enhancing coordination across the supply chain.
“With the right market signals and collaboration, Australia can build a globally competitive clean fuels industry and lead our region in climate-era innovation,” Maloney said.
“Clean fuel plants could revitalise manufacturing hubs and create skilled careers in some areas hit hardest by the decline of fossil fuels.
“But we need investment commitments this decade to avoid missing the window.”
The report ultimately frames Australia’s LCLF ambitions as both an economic necessity and a strategic imperative, with far-reaching opportunities for the nation — only if decisive action is taken now.
