Make green fuel the new hydrogen, airlines and airports urge Labor

Australian Financial Review

Qantas, Virgin Australia and some of the country’s largest airports are lobbying for $2 billion to be set aside at next month’s federal budget to develop a sustainable aviation fuel industry in a bid to reduce Australia’s dependency on imports.

In a letter to Prime Minister Anthony Albanese and Treasurer Jim Chalmers, the major airlines, airports and tourism groups have asked Labor to match a $2 billion commitment to develop hydrogen and subsidise the cost of using sustainable fuel, which is considerably higher.

“Without targeted government intervention and investment, Australia risks languishing, in the long run, as an importer of renewable fuels; leaving its domestic industries at the mercy of availability of supply and international market pricing,” the letter reads.

The aviation industry says a domestic sustainable fuel sector could add $13 billion to the economy every year by 2040 and create 13,000 jobs in the feedstock supply chain.

Crucially, the aviation industry said the funding would also reduce Australia’s dependence on imported liquid fuels from 90 per cent to 61 per cent by 2040 and just 21 per cent by 2050 boosting “national fuel security and energy independence”.

“This view is shared throughout Australia’s aviation, tourism, and refining industries; a united call to action to ensure Australia reaches its potential as a renewable fuels superpower,” the letter, obtained by The Australian Financial Review, reads.

Key to emissions targets

Sustainable fuel will be critical for the aviation sector to meet its carbon emissions goals.

However, it is not produced locally, with Qantas buying the fuel in London where subsidies mean prices are nearly at parity with kerosene fuel.

Qantas has plans to start buying more sustainable fuel in California, where the Biden administration’s Inflation Reduction Act has incentivised production through rebates and tax breaks.

In Australia, BP is due to make a final investment decision on a plant that would turn used cooking oil into sustainable fuel at the shuttered Kwinana refinery, which has an existing pipeline into Perth Airport.

It has called on the government to follow other countries and establish mandates over sustainable fuel usage to help support demand. Singapore and Japan have set mandates for the use of the fuel.

Jet Zero Australia, a privately owned group backed by Airbus and Qantas, is working on building a plant in Townsville that would turn sugarcane and ethanol into aviation fuel employing technology provided by LanzaJet in the United States.

Last month, Japanese trading house Idemitsu injected capital into the Townsville-based project.

Tourism players have asked the government to develop the sector or risk Australia’s attractiveness for international conferences and other meetings as major companies look for ways to reduce their carbon emissions by reducing long-distance travel.

Australia Post, BCG, Woodside Petroleum, Commonwealth Bank and Accenture, are among the latest businesses joining a scheme run by Qantas that allows companies to prepay for sustainable aviation fuel to help decarbonise their business travel.