Agriculture

Australian agriculture has a unique role in Australia’s low carbon liquid fuel future. As both a major supplier of feedstocks and a significant user of liquid fuels on-farm, the sector sits at the centre of the opportunity. Building domestic fuel production has the potential to create new markets for crops and processing co-products, attract regional investment and provide growers with more diversified income streams.

$3.9 billion

Annual value of Australian agricultural feedstocks suitable for low carbon liquid fuels, chiefly being canola and tallow, which are currently exported rather than processed domestically.

~84%of on-farm energy use

Petroleum diesel’s share of energy used in the Australian agriculture, fisheries and forestry sector, powering tractors, harvesters, irrigation pumps, grain trucks and livestock transport.

6.5 million tonnes

Forecast Australian canola production in 2025-26. A large share of the domestic crop is exported, much of it to Europe for bidiesel.

$36 billion

Estimated annual value of a mature Australian low carbon liquid fuel industry by 2050, with agricultural feedstocks central to that opportunity.

How agriculture is reducing emissions

Agriculture’s relationship with low carbon liquid fuels works is not single-sided. The same farms, regions and supply chains that can supply feedstocks are also significant consumers of liquid fuels and operators of the regional storage, processing and transport infrastructure on which any future low carbon liquid fuel industry will depend.

Feedstock supplier (upstream)
Fuel user (on-farm)
Fuel user (farm-related freight)
Regional infrastructure

Australian agricultural feedstocks
for low carbon liquid fuels

Australia produces a wide range of low carbon liquid fuel-relevant feedstocks. Each has a different conversion pathway, sustainability profile and market. The table below summarises Australia’s primary potential feedstocks.

01 Canola
02 Sugarcane (incl. molasses, bagasse, trash)
03 Beef and sheep tallow
04 Used cooking oil
05 Wheat straw and crop stubble
06 Energy crops (e.g. pongamia, agave, carinata, sorghum, safflower)
07 Forestry residues (related – see Forestry sector page)
Canola

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

Current dominant use

Key constraint

Sugarcane (incl. molasses, bagasse, trash)

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

  • Fermentation to ethanol (from molasses and potential from bagasse and trash)- Ethanol can be used in fuel blends or upgraded via alcohol-to-jet technologies
  • Thermochemical conversion via gasification (with Fischer Tropsch), pyrolysis and hydrothermal liquification (HTL) to renewable diesel and SAF (Pyrolysis and HTL require upgrading)

Current dominant use

Key constraint

Beef and sheep tallow

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

Current dominant use

Key constraint

Used cooking oil

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

Current dominant use

Key constraint

Wheat straw and crop stubble

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

  • Fermentation to ethanol – Ethanol can be used in fuel blends or upgraded via alcohol-to-jet technologies
  • Thermochemical conversion via gasification (with Fischer Tropsch), pyrolysis and hydrothermal liquification (HTL) to renewable diesel and SAF (Pyrolysis and HTL require upgrading)

Current dominant use

Key constraint

Energy crops (e.g. pongamia, agave, carinata, sorghum, safflower)

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

  • Fermentation to ethanol – Ethanol can be used in fuel blends or upgraded via alcohol-to-jet technologies
  • Thermochemical conversion via gasification (with Fischer Tropsch), pyrolysis and hydrothermal liquification (HTL) to renewable diesel and SAF (Pyrolysis and HTL require upgrading)

Current dominant use

Key constraint

Forestry residues (related – see Forestry sector page)

Main Australian regions

Indicative annual volume

Primary LCLF pathway(s)

  • Fermentation to ethanol – Ethanol can be used in fuel blends or upgraded via alcohol-to-jet technologies
  • Thermochemical conversion via gasification (with Fischer Tropsch), pyrolysis and hydrothermal liquification (HTL) to renewable diesel and SAF (Pyrolysis and HTL require upgrading)

Current dominant use

Key constraint

Low carbon liquid fuels for agriculture

Australian primary industries run primarily on diesel. Petroleum diesel accounts for around 84% of energy use in agriculture, forestry and fisheries combined. Replacing or blending that diesel with renewable diesel (produced from many of the same feedstocks Australia currently exports) is the most direct way low carbon liquid fuels can decarbonise the sector without requiring changes to engines or refuelling infrastructure.

Renewable diesel

Where it fits on farm

Considerations

Biodiesel

Where it fits on farm

Considerations

Bioethanol

Where it fits on farm

Considerations

Australia and low carbon liquid fuels today

Less than 1% of Australia’s liquid fuel needs

Currently met by domestic low carbon liquid fuels. Onshore production exists today but is small relative to capacity.

~2 billion litres in the project pipeline

Estimated low carbon liquid fuel production capacity in Australian projects under development, with first drop-in production expected by 2029.

~7 billion litres potential by 2030

CSIRO estimate of Australian feedstock-equivalent capacity for low carbon liquid fuels, scaling to around ~18 billion litres by 2050 if processing infrastructure is built.

Policy, regulation and technical guidance

The sections below cover the Australian policy environment for agricultural feedstocks and on-farm low carbon liquid fuel use, alongside the international frameworks that determine which Australian feedstocks reach which markets, grouped by the role they play.

Fuel quality and technical standards

Sets technical specifications for what fuel is fit for use in farm and freight equipment and supports operational fuel handling and refuelling.

Department of Climate Change, Energy, the Environment and Water (DCCEEW) – Fuel Quality Branch
Australia

Administers the Fuel Quality Standards Act 2000 and associated determinations, including determinations for paraffinic diesel (which covers renewable diesel), conventional diesel and biodiesel. This governs the technical specifications of fuels sold in Australia, including those used on-farm and in farm-related freight.

Key documents
Standards Australia
Australia

Independent national standards body that develops and publishes Australian Standards, including those relevant to fuel handling and on-farm equipment certification.

Policy and incentives

Australian Government bodies, programs and rural research and development corporations that drive low carbon liquid fuel production, agricultural feedstock supply and on-farm fuel transition.

Department of Climate Change, Energy, the Environment and Water (DCCEEW) – Cleaner Fuels Program
Australia

Administers the Cleaner Fuels Program, a $1.1 billion 10-year production-linked incentive for domestic low carbon liquid fuel projects delivered by the Australian Renewable Energy Agency (ARENA), with applications expected to open in 2026–27. Agricultural feedstocks (canola, sugarcane, tallow and used cooking oil) are central to the program’s scope.

Key documents
Department of Agriculture, Fisheries and Forestry (DAFF)
Australia

Australian Government department responsible for agricultural policy, including the development of the National Bioenergy Feedstock Strategy. DAFF coordinates feedstock supply considerations across crops, livestock, forestry and waste streams alongside the National Food Security Strategy.

Key documents
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)
Australia

Research and statistical arm of the Department of Agriculture, Fisheries and Forestry. Publishes the quarterly Australian Crop Report and Agricultural Commodities Report, providing the authoritative national data on canola, sugar and other low carbon liquid fuel-relevant agricultural production.

Key documents
Australian Renewable Energy Agency (ARENA)
Australia

Provides funding for low carbon liquid fuel research, demonstration and deployment, including the $250 million Future Made in Australia Innovation Fund stream for LCLFs and the Sustainable Aviation Fuel Funding Initiative supporting projects using Australian agricultural feedstocks.

Key documents
Clean Energy Finance Corporation (CEFC)
Australia

Peak industry body for bioenergy in Australia and New Zealand. Convenes the Low Carbon Fuels Alliance and the Australian National Feedstock Roundtable, and publishes industry-commissioned analyses including Securing our Fuel Future.

Key documents
Bioenergy Australia
Australia

Australia’s peak industry body for the bioenergy sector, supporting low carbon liquid fuel production using Australian agricultural feedstocks. Modelled the $36 billion industry potential by 2050 in Refined Ambitions.

Key documents
United States Internal Revenue Service – Clean Fuel Production Credit (45Z)
Australia

United States Clean Fuel Production Credit incentivising low carbon fuels under the Inflation Reduction Act, as amended by the One Big Beautiful Bill Act 2025. From 2026, eligibility is restricted to fuels produced from feedstocks grown in the United States, Canada or Mexico, materially affecting demand for Australian tallow and used cooking oil.

Certification criteria

Criteria that govern how fuel’s and feedstock’s life-cycle emissions, land-use credentials and provenance are assessed, certified and claimed.

Clean Energy Regulator – Guarantee of Origin
Australia

Australia’s Guarantee of Origin scheme, which is administered by the Clean Energy Regulator, provides a transparent, publicly accessible record of the emissions associated with the production of key commodities, including low carbon liquid fuels. The scheme is being expanded to cover low carbon liquid fuels.

International Sustainability and Carbon Certification (ISCC)
International

Independent global certification scheme covering sustainable biomass, bio-based materials, renewable fuels and circular economy products. Used by Australian biodiesel producers, used cooking oil collectors and tallow exporters to demonstrate compliance with European and other international markets.

Key documents
European Commission – Renewable Energy Directive (RED III)
International

Sets the European Union’s sustainability and greenhouse gas emissions saving criteria for renewable fuels, including caps on crop-based feedstocks and indirect land-use change provisions. Determines whether Australian canola oil, tallow and used cooking oil can be counted toward EU member state renewable energy targets.

Key documents
International Civil Aviation Organization (ICAO) – CORSIA
International

Sets sustainability criteria and default life-cycle values for sustainable aviation fuel (SAF) under the Carbon Offsetting and Reduction Scheme for International Aviation. Includes default values for HEFA fuels from canola, tallow and used cooking oil and indirect land-use change provisions affecting Australian feedstock eligibility.

Key documents

Mandates, targets and feedstock requirements

Regulations and government targets that require or aim for rising shares of low carbon liquid fuel use, and feedstock-origin and sustainability requirements embedded in international frameworks Australian exporters must meet. Australia has not introduced a national low carbon liquid fuel blending mandate; two state ethanol/biodiesel mandates remain in New South Wales and Queensland.

New South Wales Government – Biofuels mandates
Australia

Sets minimum sales mandates of 6% ethanol in regular unleaded petrol and 2% biodiesel in diesel in New South Wales.

Queensland Government – Biofuels mandate
Australia

Sets minimum sales mandates of 4% ethanol in regular unleaded petrol and 0.5% biodiesel in diesel in Queensland.

European Commission – ReFuelEU Aviation
International

European Union regulation requiring rising minimum SAF supply at EU airports, beginning at 2% from 2025 and rising to 70% by 2050. Provides one of the structured demand signals for SAF produced from Australian agricultural feedstocks.

Key documents
United Kingdom (UK) Department for Transport – SAF Mandate
International

UK regulation requiring rising minimum SAF and power-to-liquid SAF shares in jet fuel supplied at UK airports from 2025 (2%), rising to 10% in 2030 and 22% in 2040. Affects offtake demand for Australian SAF feedstocks.

Key documents
ASSISTANT

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What does hard-to-abate mean? What does drop-in fuel mean? What feedstocks are available in Australia? What is sustainable aviation fuel (SAF)? What is carbon intensity and how is it reported?

Resources

Browse a searchable collection of trusted reports, roadmaps and case studies.

    • Roadmap
    • 2021

    Australia’s Bioenergy Roadmap Report

    ARENA’s Bioenergy Roadmap report (prepared by Enea Consulting and Deloitte) outlines Australia’s bioenergy opportunities, including renewable fuels and biogas pathways, feedstocks and actions to scale the sector.
    Read more
    • Report
    • 2025

    Opportunities and Priorities for a Low Carbon Liquid Fuel Industry in Australia

    CSIRO report outlining opportunities for a low-carbon liquid fuel industry in Australia and identifying priorities to progress projects from development through to commercial scale.
    Read more
    • Report
    • 2025

    Refined Ambitions: Exploring Australia’s low carbon liquid fuel potential

    CEFC’s Refined Ambitions report assesses Australia’s low-carbon liquid fuel potential, covering supply chains, investment considerations and policy levers across fuels such as SAF and renewable diesel.
    Read more
    • Report
    • 2026

    Agricultural Commodities Report

    ABARES quarterly outlook on Australian agricultural commodities, providing forecasts and analysis relevant to feedstock supply for low carbon liquid fuels.
    Read more
    • Report
    • 2024

    Update on drop-in biofuel and co-processing commercialization

    IEA Bioenergy Task 39 report on progress in drop-in biofuel and co-processing commercialisation.
    Read more
    • Webpage
    • 2026

    National Bioenergy Feedstock Strategy

    Australian Government strategy on bioenergy feedstocks, including supply, sustainability and agricultural sector linkages.
    Read more
    • Report
    • 2026

    Australian Crop Report

    ABARES quarterly report providing forecasts of Australian winter and summer crop production, used to inform feedstock availability for biofuels including ethanol and renewable diesel pathways.
    Read more
    • Webpage
    • 2026

    Guarantee of Origin scheme (Australia)

    Australian Government webpage describing the Guarantee of Origin scheme for tracking and communicating emissions intensity and renewable attributes of products, supporting consistent certification and reporting.
    Read more
    • Directive
    • 2023

    Renewable Energy Directive (RED III) amendment (Directive (EU) 2023/2413)

    EU directive amending the Renewable Energy Directive (RED III), including updated renewable energy and transport provisions and sustainability rules that affect biofuels and other renewable fuel pathways.
    Read more
    • Report
    • 2022

    The diesel transition: Petroleum diesel alternatives for the Australian agriculture, fisheries and forestry sector

    AgriFutures Australia report on alternatives to conventional diesel for agriculture, fisheries and forestry, covering low-carbon liquid fuels and other options such as electrification and hydrogen.
    Read more