Budget gives $1.7b boost for green aviation fuel but still no mandate

Australian Financial Review

The Albanese government has indicated it will prioritise renewable fuels for the aviation industry but delayed a decision on mandating the use of such fuels, a measure that has divided the industry worldwide.

Tuesday’s budget included a $1.7 billion allocation over the next decade to the Future Made in Australia Innovation Fund. This will support the Australian Renewable Energy Agency’s efforts to commercialise low-carbon liquid fuels.

Many see the funding as the first step in developing a local industry that could add $13 billion a year to gross domestic product by 2040.

Tourism and Transport Forum chief executive Margy Osmond said a local sustainable aviation fuels (SAF) industry would help safeguard the future of Australia’s tourism and aviation sectors.

“Other nations, from the US and Canada, to Europe, Singapore and Japan, are prioritising both policies to support SAF and direct investment. Australia cannot afford to fall behind, especially as a long-haul destination,” Ms Osmond said.

The budget also allocated $18.5 million over four years to develop a certification scheme for sustainable aviation fuels and renewable diesel. A further $1.5 million was allocated for a two-year analysis of the costs and benefits of introducing mandates or other demand-side measures for the take-up of low carbon liquid fuels.

Other jurisdictions are adopting such measures. Last year, the European Parliament voted to increase the use of sustainable aviation fuels at EU airports from a minimum of 2 per cent next year.

EU member states are still to approve the requirement, which will steadily increase. Japan and Singapore have also gone down the mandate track, though major airlines are divided on their support for such measures.

Virgin Australia has warned against rising costs and does not support such mandates.

“Decarbonisation is critical, but we do not want it to come at the cost of affordable travel for Australians. As a value carrier we truly believe we can have both – a sustainable industry that our customers can afford to use,” Virgin’s chief sustainability officer, Christian Bennet, said.

But Qantas has welcomed the government’s move towards mandating a sustainable fuel mix. “It’s a critical policy lever to secure capital and investment as well as providing a stable regulatory framework that’s essential to scale a domestic SAF sector,” Qantas chief sustainability officer Andrew Parker said.

French plane manufacturer Airbus’ chief representative for Australia, New Zealand and the Pacific, Stephen Forshaw, described the budget measures as a “good first step” and a positive signal to investors.

“Studying the introduction of mandates for the use of SAF is very important. This sends a signal to industry that mandates are coming to Australia like they are in other places such as Singapore, Japan and Europe,” he said.

“If we are to achieve our ambition of becoming a renewable energy superpower, we need to move fast, before other countries entrench their first-mover advantage. We need to move SAF from plans today to planes tomorrow.”

Studies suggest a local SAF industry could add nearly 18,000 jobs, while reducing Australia’s dependency on liquid fuel imports from 90 per cent to 61 per cent by 2040 and just 21 per cent by 2050.

Shahana McKenzie, chief executive of Biofuels Australia, said the budget measures were a “crucial first step in backing this new industry”.

“It will send the signal to global project developers and investors that Australia is the place to do business,” Ms McKenzie said.

“We are already considered a global hotspot given our vast agricultural might and industrial base, with the CSIRO reporting that Australia will have enough feedstock in 2025 to replace 60 per cent of local jet fuel with sustainable aviation fuel, growing to 90 per cent by 2050.”