Australia Considers Mandatory Low-Carbon Fuel Requirements to Boost Domestic Biofuel Production

Australia’s federal government is consulting on a proposal that would require fuel suppliers to purchase or supply specified volumes of low-carbon liquid fuels, including bioethanol and biodiesel, to strengthen domestic fuel security and support local production.

According to ABC News, Australia exported more than 60 million litres of domestically produced ethanol and biodiesel in the first half of 2026, despite facing additional fuel supply needs. The Biofuel Producers Alliance estimates that its members have a combined production capacity of approximately 470 million litres of ethanol and biodiesel, equivalent to around three days of additional fuel reserves.

Australia currently holds approximately 41 days of petrol reserves and 33 days of diesel reserves, below the international benchmark of 90 days. The industry alliance is calling for a nationwide biofuel blending mandate from 2027, following reported shortages of E10 petrol in March and April, when around 24 million litres of ethanol were exported to Southeast Asia, South Korea and other markets.

Under the government’s proposal, mandatory low-carbon fuel requirements could begin in 2029. After 2035, obligations would be based on fuel carbon intensity rather than specific fuel types or volumes.

The Australian Chamber of Commerce and Industry estimates that domestic projects could potentially supply up to 2 billion litres of low-carbon fuel. However, it cautions against introducing mandatory requirements before adequate supply, competitive pricing, infrastructure and monitoring systems are established. Biodiesel accounted for just 0.1% of Australia’s diesel consumption last year.