LOW CARBON FUELS 101
Learn the basics of low carbon liquid fuels. Find out what they are, how they’re made, and why they matter for Australia’s energy future.
WHAT ARE LOW CARBON FUELS?
Low carbon liquid fuels (LCLFs) are renewable alternatives to fossil fuels. They can be made from sources such as sugarcane, canola, agricultural residues, animal fats, used cooking oil, or from captured carbon and green hydrogen.
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Examples include ethanol, biodiesel, renewable diesel, sustainable aviation fuel (SAF), and synthetic. These fuels are designed to reduce emissions in sectors where liquid energy will continue to be essential.
To learn more detail on these different fuel types, read this report.
WHO CAN USE THEM?
Low carbon liquid fuels can be used across industries that need reliable liquid fuels. This includes aviation and shipping, to freight, mining, agriculture and defence.
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They are especially valuable because many are 'drop-in fuels'. This means they achieve the standard applicable for traditional fossil fuels, and work with existing engines and infrastructure.
FEEDSTOCK DIVERSITY
Low carbon fuels are not reliant on a single feedstock source. Australia is in an enviable position globally given the large range of feedstocks already existing in abundance.
Biogenic feedstocks:
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Oilseeds including canola, carinta, cotton seed and other novel oilseeds
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Animal fats such as tallow
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Waste oils such as used cooking oil from your local McDonalds
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Sugar and carbohydrate-based including sugarcane and sorghum
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Agricultural and crop residues such as wheat, sorghum, sugarcane
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Forestry waste such as residues from sawmill operations
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Municipal, construction and demolition waste that would otherwise go to landfill
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Short rotation trees such as oil mallee
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Synthetic Feedstocks:
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Such as Hydrogen, Co2, Biomethane and renewable energy to produce Power to Liquid
In addition, incredible progress is being made with feedstocks such as algae.
HARD-TO-ELECTRIFY SECTORS
Not every industry can run on batteries or direct electrification. Aviation, heavy freight, mining, rail, construction and shipping will still need dense liquid fuels for decades.
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Low carbon fuels are particularly useful here because they can be used straight away in existing vehicles and supply chains, delivering immediate emissions cuts while other solutions scale.
HOW THEY REDUCE EMISSIONS
Compared to fossil fuels, low carbon fuels deliver much lower lifecycle emissions. Plant-based sources absorb CO₂ during growth, effectively closing the carbon loop.​
Low carbon fuels are not reliant on a single source. They can be produced from:
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Waste oils (used cooking oil, tallow)
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Energy crops (canola, sugarcane)
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Crop and forestry residues
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Captured carbon with green hydrogen
Much of Australia’s potential lies in agricultural residues and waste streams - fuels made from materials that would otherwise be discarded.
LOW CARBON FUELS IN AUSTRALIA
Australia has produced biodiesel and ethanol since the early 2000s, though facilities currently run below capacity.
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Second-generation projects are now emerging. Meanwhile, Australia exports large volumes of tallow, canola and used cooking oil to overseas refineries.
AUSTRALIA'S OPPORTUNITY
Australia is well-placed to build a strong low carbon fuel industry. We have abundant agricultural residues, waste oils, and renewable resources to produce fuels locally.
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Reports estimate the industry could be worth $36 billion by 2050, avoiding around 230 million tonnes of emissions. Building capacity here also boosts energy security, as Australia currently imports more than 80% of its liquid fuels.
WHAT'S NEEDED TO SCALE UP
To grow this industry, several factors are critical:
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Clearer policy signals such as blending mandates or fuel standards
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Investment support to reduce risk and encourage private capital
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Strong sustainability certification
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New refining and hydrogen infrastructure
With the right policy and investment, Australia could not only meet domestic demand but also export sustainable fuels across the Asia-Pacific.