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Australia is laying the groundwork for a domestic bioenergy feedstock industry worth up to $15 billion a year, betting that canola, tallow, crop residues, and forestry waste can underpin a low-carbon liquid fuel (LCLF) sector capable of supplying more than 40% of the country's projected liquid fuel demand.
The National Bioenergy Feedstock Strategy, released this week, effectively locks agriculture into liquid fuels well beyond 2050, with the federal government conceding that farming is one of several sectors expected to keep relying on diesel long after much of the rest of the economy has electrified.
A local LCLF industry could be kick-started by capturing the value of $6 billion worth of feedstock currently exported each year and processing it onshore into renewable diesel and sustainable aviation fuel. The output would then be redirected toward hard-to-electrify sectors, including agriculture, heavy freight, mining, long-distance aviation, and shipping. Long-distance aviation alone accounts for 2.5% of global carbon emissions.
The grains and horticulture sectors are expected to be the biggest winners, with feedlots, where biogas projects have so far struggled to gain traction, also positioned to benefit.
The strategy lands at a moment of renewed concern about Australia's fuel security, following the outbreak of war in the Middle East in late February that strangled traffic through the Strait of Hormuz and slowed oil flows from the region to a trickle. The episode tested the country's comparatively low fuel reserves relative to similar economies.
Australia currently consumes more than 56 billion liters of liquid fuel each year, with more than 90% imported or refined from imported crude. Diesel accounts for more than 90% of on-farm energy use and as much as 8% of farm cash costs.
The government believes a mature LCLF industry could eventually supply more than 40% of Australia's projected liquid fuel demand. Low-carbon liquid fuels are viewed as a bridge between today's fossil fuels and the eventual rollout of cleaner alternatives such as electrification and green hydrogen, which could deliver deeper emissions cuts.
GrainGrowers chief executive Shona Gawel welcomed the strategy, describing the development of a domestic LCLF industry as a major opportunity for Australia's grains sector. 'It is critical the local industry is built on domestic feedstocks, including Australian-grown grain and oilseeds, so we don't simply replace dependence on one imported fuel source with another,' she said. Ms Gawel added that supporting growers to participate and building long-term confidence would be critical to developing the nascent industry.
Current Australian feedstock sources include on-farm, forestry, and sawmill waste; carbohydrates such as sugar, bagasse, and sorghum; oilseeds including canola and cottonseed; and tallow waste and used cooking oil.
The report identifies canola as the most mature agricultural feedstock. Australia produced more than 6.4 million tonnes of canola in 2024-25, of which three-quarters was exported. Existing infrastructure, storage, logistics, and export pathways are already in place and could be adapted to support domestic biofuel production, particularly in Western Australia.
Agriculture Minister Julie Collins said the feedstocks already being produced for international markets put Australian growers in a strong position to capture growing global demand. 'We heard from farmers and producers across the supply chain about the need for a clear national direction for Australia's bioenergy feedstock sector and this new strategy responds to that call with a clear framework for sustainable growth,' she said.
The strategy, which sits alongside the government's $1.1 billion cleaner fuel program announced last year, suggests the industry could eventually support about 26,000 jobs through regional supply chains capable of aggregating, storing, processing, and transporting feedstocks to fuel manufacturers.
The initial target is to direct energy crops and biomass production toward 'marginal land,' citing a proposed $400 million biomethane project in western Victoria that aims to convert cereal straw into renewable gas without compromising soil health or moisture retention.
In 2024, GrainCorp, IFM Investors, and Ampol signed a memorandum of understanding to explore an integrated renewable fuels supply chain in Australia and called on the government to accelerate the domestic LCLF market. The report also highlights Australia's forestry sector as a major untapped resource.
The government released a consultation paper earlier this month proposing a national demand mechanism for LCLFs, alongside a separate $14.8 billion package to build a government-owned fuel reserve.
Source: Farm Online