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.
Quick links:
$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)
Australian farms produce a wide range of feedstocks suitable for low carbon liquid fuels.
- Oilseeds (canola)
- Sugar crops (sugarcane, molasses)
- Animal fats (beef and sheep tallow)
- Used cooking oil collected through hospitality and food-processing chains
- Lignocellulosic residues (wheat straw, stubble, sugarcane bagasse)
These are the raw materials that are used to produce low carbon liquid fuels.
Fuel user (on-farm)
Tractors, harvesters, irrigation pumps and on-farm generators are almost entirely diesel-powered.
- Often run intensively on a seasonal cycle
- Frequently located off-grid in regional areas
- Drop-in renewable diesel is a direct substitute under Australian fuel quality standards
- Biodiesel blends can be used in light and medium fleet equipment.
Fuel user (farm-related freight)
Heavy road freight running between farm, silo, port and processor is a major diesel user.
- Grain trucks
- Livestock transporters
- Refrigerated produce freight
- Rail haulage of bulk commodities
Sits in the same fuel pool as line-haul road freight and shares the regional refuelling network with farms.
Regional infrastructure
Australian farms produce a wide range of feedstocks suitable for low carbon liquid fuels.
- Bulk storage and country fuel terminals
- Oilseed crushing plants and sugar mills
- Renderers
- Rural fuel resellers
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.
Canola
Main Australian regions
WA, SA, VIC, southern NSW
Indicative annual volume
~6.5 Mt seed forecast in 2025-26.
Primary LCLF pathway(s)
Hydroprocessed esters and fatty acids (HEFA) to renewable diesel and sustainable aviation fuel (SAF)
Current dominant use
Edible oil; large share exported, much to European biodiesel markets
Key constraint
Indirect land-use change treatment under EU and US frameworks; competing food-grade use
Sugarcane (incl. molasses, bagasse, trash)
Main Australian regions
Coastal Queensland (Mossman south to the NSW border) and northern NSW (Tweed, Richmond and Clarence valleys, including Grafton)
Indicative annual volume
~30 to 35 Mt cane; ~5.8 Mt to 6.8 Mt bagasse; ~4 to 4.5 Mt raw sugar; 85% exported.
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
Sugar export; molasses to stockfeed and limited ethanol production; bagasse (and trash) for mill cogeneration; some trash retained on field for agronomic value
Key constraint
Bagasse already used for cogeneration; require collection logistics for cane trash
Beef and sheep tallow
Main Australian regions
National rendering plants linked to abattoirs; largest in QLD, NSW, VIC
Indicative annual volume
~550,000 to 640,000 tonnes per year; majority exported.
Primary LCLF pathway(s)
HEFA to renewable diesel and SAF; transesterification to biodiesel
Current dominant use
Export to United States and Singapore biofuel refineries; oleochemicals; stockfeed
Key constraint
Highly exposed to overseas policy changes and tariffs
Used cooking oil
Main Australian regions
Capital cities and regional hospitality, food processing
Indicative annual volume
National collected volumes not centrally reported.
Primary LCLF pathway(s)
HEFA to renewable diesel and SAF; transesterification to biodiesel
Current dominant use
Predominantly exported as feedstock; some domestic biodiesel production
Key constraint
Collection-network completeness; international competition for waste feedstocks
Wheat straw and crop stubble
Main Australian regions
WA, NSW, SA, VIC grain belt
Indicative annual volume
Indicative ~28 Mt per year potentially available across crop residues nationally.
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
Soil cover; livestock feed; in-paddock burning of harvest rows
Key constraint
Soil carbon and nutrient cycling; collection cost and density
Energy crops (e.g. pongamia, agave, carinata, sorghum, safflower)
Main Australian regions
Trial scale; northern Queensland for pongamia; sorghum across QLD and NSW
Indicative annual volume
Trial plantings only – tens to thousands of hectares.
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
Pre-commercial; research and pilot projects
Key constraint
Time to commercial scale; market depth and offtake
Forestry residues (related – see Forestry sector page)
Main Australian regions
Tas, VIC, WA, NSW
Indicative annual volume
~11 Mt to ~59 Mt per year potentially available from plantation forest and short rotation tree crops
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
Pulp; panels; mill energy
Key constraint
Treated separately under National Bioenergy Feedstock Strategy
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
Tractors, harvesters, generators, freight, irrigation pumps
Considerations
Drop-in substitute for petroleum diesel; certified to diesel specifications under Australian fuel quality standards.
Biodiesel
Where it fits on farm
Light and medium diesel fleet uses; some heavy machinery
Considerations
Blend-limited; typically B5 to B20 subject to engine warranty.
Bioethanol
Where it fits on farm
Light vehicle fleets; on-farm utes
Considerations
Blend-limited; E10 most common in Australia; less relevant for heavy machinery.
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.
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.
Independent national standards body that develops and publishes Australian Standards, including those relevant to fuel handling and on-farm equipment certification.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Sets minimum sales mandates of 6% ethanol in regular unleaded petrol and 2% biodiesel in diesel in New South Wales.
Sets minimum sales mandates of 4% ethanol in regular unleaded petrol and 0.5% biodiesel in diesel in Queensland.
Ask the Hub
Not sure where to start? Ask a question or let the Assistant help you make sense of the basics.
Resources
Browse a searchable collection of trusted reports, roadmaps and case studies.