Airlines and transport companies may be forced to use more biofuel, with tax breaks for companies that produce it, under proposals the federal government is considering.
Transport Minister Catherine King launched a public consultation into low carbon liquid fuel on Thursday as part of the federal government's Future Made in Australia policy.
It will consider the use of biofuels such as sustainable aviation fuel, renewable diesel, green diesel and bio-gasoline that can be used in existing vehicles and made using agricultural waste products.
The announcement comes days after the Queensland government named sustainable aviation fuel as part of its budget commitment to renewable energy, and after the federal government assigned $18.5 million in its budget to creating a biofuel certification scheme.
The low carbon liquid fuel consultation paper notes biofuels could deliver the largest opportunity to cut emissions from aviation, heavy vehicle, rail and maritime transport, as well as industries such as mining, agriculture and construction where electrification or the use of hydrogen was not possible.
Ms King said Australia also had the opportunity to play a large role in producing advanced biofuels due to its agricultural resources.
"Our country currently exports a significant amount of canola and tallow each year, which is used to produce biofuels in Europe," she said.
"We should be producing it right here, on our shores."
The paper notes Australia exported 400 kilotonnes of tallow and 3.4 metric tonnes of canola seed to Europe in 2022 that could be used to create biofuels.
Energy Minister Chris Bowen said producing the in-demand low-emission fuel locally would have greater benefits.
"Making low carbon liquid fuel on our own shores, from Australian renewables and Australian feedstock, will make our fuel supply cleaner, stronger and more secure," he said.
The consultation paper asks questions about incentives the government could offer for Australian firms to produce biofuels, including changes to the tax system, grant-based funding or contract changes, as well as eligibility thresholds to ensure biofuels did produce lower emissions.
It also questions whether the government should introduce mandates for the use of biofuels to cut emissions across the transport sector.
The European Union, for example, will require two per cent of the fuel used at airports to be sustainable aviation fuel in 2025, increasing to six per cent by 2030 and 20 per cent by 2035.
Australian airlines have begun using sustainable aviation fuel, with Qantas committing to use 10 per cent biofuel by 2030. Qantas and Virgin have both committed to meet the industry's standard of net-zero emissions by 2050.
A recent report into sustainable aviation fuel by agribusiness banking firm Rabobank called for greater commitments and support for the local industry from airlines and governments to help farming firms capitalise on the opportunity.
"For at least the next decade, (sustainable aviation fuel) can generate more demand for agricultural products and economic benefits for farmers," the report found.
Submissions to the low carbon liquid fuel consultation will close on July 18.
