In August 2026, the Australian Government released a consultation paper on establishing a demand mechanism to support the development of a domestic low carbon liquid fuel (LCLF) industry.
The consultation paper seeks views on a two stage approach to supporting the use of low carbon liquid fuels: an initial volumetric mandate (2030-2035) and then a carbon intensity scheme.
This submission argues that Australia should:
- move straight to a carbon intensity scheme
- remove biodiesel as an eligible low carbon fuel
- reduce the 2035 LCLF share of covered fuel demand target to 5 per cent
- allow non-fuel credits for vehicle electrification and green hydrogen refuelling infrastructure from the start of the scheme
- support local production with a 2x credit multiplier
- integrate the market for LCLF credits with the ACCU or Safeguard Mechanism credit markets and have a common buyout price, and
- adjust the deemed energy content and emission factors for fuel each time suppliers increased LCLF percentages to meet their targets. Businesses that wished to buy fuel with a higher renewable content would be able to claim additional credits.
The submission also raises an important technical issue with the modelling used in the consultation paper.