Australia’s LCLF Demand Measure: What’s Proposed, Who It Affects & What’s Still Undecided

Australia’s proposed rules for low‑carbon liquid fuels (LCLF) are still just that – proposed. The government’s Securing Australia’s Cleaner Fuels Industry consultation paper closed for submissions on 15 September 2026. Nothing here is law yet, and no design decisions have been announced since the consultation closed. This article explains what’s actually on the table, who it would obligate, and what’s still to be settled. It builds on our earlier piece on the mechanism‑versus‑mandate distinction - read more here.

Why Is A Demand Measure Proposed?

More than 90% of the petrol, diesel and jet fuel Australia uses is imported directly or refined from imported crude, creating two linked problems: exposure to overseas supply shocks, and a major source of domestic emissions in sectors like aviation, heavy transport, mining, agriculture, that can’t easily electrify in the near term. LCLF (renewable diesel, sustainable aviation fuel, biodiesel, ethanol) is positioned to address both, largely because renewable diesel and SAF are “drop‑in” fuels that use existing tanks, pipelines and engines.

The consultation papersets out a two‑phase conceptual framework. It would place obligations on designated fuel suppliers or other obligated entities.

Phase 1: Market Formation, Proposed From 2029

Phase 1 would use volumetric requirements to provide a clear and predictable demand signal for LCLF. Obligated entities would be required to supply or acquire specified volumes of eligible LCLF.

The consultation paper’s illustrative range is 750–1,900 megalitres in 2030, equivalent to approximately 1–4% of covered fuel demand, rising to 3,450–8,900 megalitres in 2035, or approximately 7–20%.

These figures assume the mechanism covers diesel, jet fuel and petrol. They are consultation ranges, not final targets.

A separate jet fuel requirement is also being considered. During Phase 1, this could involve dedicated volumetric requirements for sustainable aviation fuel, reflecting aviation’s limited decarbonisation alternatives and the higher cost of SAF.

Phase 2: Transition To Carbon‑Intensity Targets From 2035

From 2035, the mechanism could transition from fixed volumetric requirements to carbon‑intensity targets. These would be expressed as annual benchmarks measured in grams of CO₂‑e per megajoule.

This would give obligated entities more flexibility in how they meet their obligations while placing greater emphasis on the lifecycle emissions performance of the fuels supplied. The consultation paper discusses an indicative annual carbon‑intensity decline rate in the order of 1% to 2.7%, but the final trajectory remains undecided.

A separate jet fuel requirement could continue in Phase 2, with the jet fuel pool subject to its own carbon‑intensity benchmark.

Who Has To Comply - What Is An Obligated Entity?

The obligation would sit with designated fuel suppliers or other obligated entities – for example, refiners, importers and certain producers – rather than drivers, passengers or ordinary end users. The consultation paper proposes allocating individual obligations according to each entity’s share of fuel supply.

In practice, suppliers would most likely comply by blending renewable fuel into standard product, so most people would keep buying “diesel” or “petrol” as usual, with the renewable share already in it rather than something they choose at the pump.

The paper also indicates that compliance could be supported by crediting and trading arrangements, allowing obligated entities that exceed their requirement to generate credits that could be sold to others.

What’s Still Undecided Now Consultation Has Closed?

Submissions closed 15 September 2026. Open questions the government was seeking feedback on include:

• How ambitious the 2030–35 targets should be

• Whether diesel, jet fuel and petrol are all covered from the start

• How to balance investment certainty against flexibility and cost

• What transitional evidence and timelines are needed so early LCLF projects aren’t stalled

Final settings – targets, fuel coverage, compliance design, support for domestic producers – will be informed by this consultation and further policy development. The mechanism would operate alongside the separate $1.1 billion Cleaner Fuels Program, which is a supply‑side measure intended to stimulate private investment in domestic LCLF production and is being delivered through ARENA.

What Is The Impact on HVO Today?

Nothing in this framework changes how our customers buy or use HVO100 today – it’s still a voluntary, drop‑in switch available now, well ahead of any 2029 supplier obligation. What it does signal is where the market is heading: renewable diesel moving from a niche procurement decision to a standard part of the fuel pool. For businesses already using HVO100, that’s a tailwind, not a compliance burden.

For a closer look at how the emissions‑reporting side of this is developing in the meantime, our next piece covers the NGER co‑processing reform now in force and how it sets up whatever demand mechanism eventually lands.

FAQ

Q: Is this a “mandate” or a “mechanism”?

A: The government calls it a demand mechanism – a framework that could include volumetric and later carbon‑intensity requirements on suppliers. It’s not yet legislated, so calling it a mandate ahead of a final decision overstates where the policy actually is.

Q: When would obligations on fuel suppliers start?

A: Phase 1 volumetric requirements are proposed from around 2029, shifting to carbon‑intensity targets from around 2035 – both subject to final design.

Q: Will I have to choose renewable fuel at the pump?

A: No. Compliance is designed to happen through blending at the supplier level, so the renewable share would already be in standard diesel or petrol.

Q: What happens now the consultation has closed?

A: As of publication, no summary of submissions or design decisions has been released. Final settings are expected to be informed by this consultation alongside the Cleaner Fuels Program.

Sources:

[1] Securing Australia's Cleaner Fuels Industry Consultation Paper. Proposed two-phase LCLF demand mechanism design. View source

[2] Australia's DCCEEW issues consultation on potential SAF mandate. Consultation launch date and two-phase framework detail. View source

[3]‍ ‍Building Australia's fuel security: strategic fuel reserves and low carbon liquid fuels, Minister for Infrastructure, Transport, Regional Development and Local Government. Consultation scope and Fuel Security and Resilience Package context. View source

Disclaimer:

This article reflects publicly available information as at the date of publication and is provided for general information only. It does not constitute legal, financial or compliance advice. Policy settings described here may be proposed, under consultation or subject to change - readers should confirm current requirements with the relevant government department or their own advisers before relying on this content for compliance purposes.