With the rest of the world transitioning to sustainable fuels to meet their own net zero goals, Australian can learn some valuable lessons from Europe, the United States, China and beyond.
Adopting sustainable fuels, like green hydrogen (hydrogen made from renewable energy), biofuels, and synthetic fuels, is a key part of the new energy transition.
Although many countries have committed to reaching net zero emissions, their different economic, social, political, and environmental situations have led them to adopt various approaches to using sustainable fuels. However, there are key lessons that Australia can learn from these efforts.
European Union
The European Union presents a unique model as it sets collective climate targets for its member states.
The European Green Deal is the European Union’s policy to become the first climate neutral continent by 2050. The European Union’s Renewable Energy Directive has set a binding renewable energy target that 42.5% of all energy consumption by 2030 is generated by renewable energy sources. The European Union has also called for renewable energy generation to accommodate increased production of sustainable fuels.
The European Union’s ambitious targets are driven by both climate concerns and the geopolitical drive to achieve energy security and affordable energy prices, This latter concern was heightened by the COVID-19 pandemic and the conflict between Russia and Ukraine (which affected the European Union’s energy supply). On this point, a notable detail of the European Union’s 2030 target includes becoming independent from Russian fossil fuels by increasing the use of sustainable fuels.1
To achieve this, the European Union’s hydrogen strategy – ‘A Hydrogen Strategy for a Climate-Neutral Europe’ calls for investments to decarbonise existing hydrogen production plants to produce green hydrogen and for the development of a union strategy for imported and domestic hydrogen based on the energy mix of each European Union member state. On biofuels, the European Union adopts a cautious approach despite being positive towards sustainable fuels generally. This is because policies that incentivise biofuels such as woody biomass without constraints may lead to the deforestation and unwanted impacts on the manufacturing of wood-based products.2
While the European Union has set collective climate targets and issued guidance on sustainable fuels, domestic strategy has also been set by particular member states. For example, Germany’s National Hydrogen Strategy aims to meet 20 TWh of annual national energy consumption requirements with hydrogen by 2030. Further, Sweden has policies incentivising ethanol and biodiesel with the aim for a fossil-free transport sector by 2030.
United States
The approach to sustainable fuels in the United States’ net zero emissions strategy for 2025 is comprised of both state-level and federal-level policies.
Federal policies such as the Renewable Fuels Standards Rule sets out detailed targets of renewable fuel volume targets, as set out below:
More specifically, the United States has also set specific targets in relation to the decarbonisation of its transportation sector (the country’s largest emissions source) as a part of the White House’s 2021 publication titled ‘Long-Term Strategy of the United States’ (Long Term Strategy Publication). Within the publication, the White House has established a goal that 3 billion gallons of sustainable aviation fuel will be produced by 2030.
The United States will also incentivise carbon capture and green hydrogen produced from renewable energy, nuclear energy, and waste to energy facilities, as well as investing in infrastructure such as biorefineries and transportation infrastructure.3 Although the White House did not provide details of such incentives in its Long Term Strategy Publication, there are various government incentives in respect of sustainable fuels available in the US, including tax credits for green hydrogen producers, and financial assistance to landowners and operators who supply feedstock for biofuel production facilities.
At the state level, different policy frameworks apply. For example, California’s Low Carbon Fuel Standard (LCFS) is a framework that awards environmental credits for the use of sustainable fuelsand mandates the carbon intensity of transportation fuels in California must decline each year. To comply, fuel sellers must reduce emissions within their own supply chains or procure credits under the LCFS framework. The Kleinman Center of Energy Policy estimates that since 2013, USD $22.1 billion worth of LCFS credits have been issued to biofuel producers.4 While the LCFS has been effective, it has also been criticised for prioritising biofuels over electrification, causing environmental harms such as deforestation, competing with food production, and increasing retail fuel prices.5
China
China has become a global leader in the sustainable fuels sector despite producing the most greenhouse gas emissions. To achieve carbon neutrality by 2060, China has prioritised the development of renewable energy sources driven by the dual goals of reducing air pollution and addressing climate change.
China is the world’s largest producer of hydrogen and the China Hydrogen Alliance anticipates hydrogen to comprise approximately 10% of China’s energy supply by 2050. Although hydrogen production in China has traditionally relied on fossil fuels as feedstock, China plans to shift this reliance to renewable sources of feedstock. Specifically, by 2025 – China aims to reduce one million to two million tons of carbon emissions annually by developing the capacity to produce 100,000 to 200,000 tons of renewable hydrogen annually. It also intends to have a fleet of 50,000 hydrogen fueled vehicles.6
Takeaways for Australia
As Australia progresses towards its goal of net zero by 2050, it should consider the sustainable fuel strategies and policies adopted by other countries. This will promote comparative lessons and open up opportunities for collaboration.
Australia has traditionally been an energy exporter of coal and natural gas. Given Australia’s renewable energy advantages (including comparatively high solar radiation per square meter), it is well positioned to foster the production and export of green hydrogen. This was recognised in the Australian government’s 2024 National Hydrogen Strategy. Notably, Australia has established partnerships with countries that prioritise hydrogen as a part of their energy transition strategy such as Germany to supply hydrogen. Given China is the largest hydrogen producer, hydrogen policies in China may be valuable in informing Australia’s hydrogen production strategy.
Besides hydrogen, biofuels also form an important part of Australia’s sustainable fuels strategy. The Australian Renewable Energy Agency (ARENA) anticipates significant growth in the biofuels industry, particularly in the aviation industry. ARENA has published Australia’s Bioenergy Roadmap which sets out various incentives and regulatory frameworks which promote the use of biofuels derived from agricultural waste, dedicated energy crops, and municipal solid waste. Awareness of the European Union’s cautious approach and California’s bold approach towards biofuels provides valuable guidance on issues to be aware of as the biofuel industry in Australia matures.
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1European Parliament and Council, ‘Directive (EU) 2023/2413 of the European Parliament and of the Council of 12 December 2023’ (Web Page, EUR-Lex) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023L2413.
2European Parliament and Council, ‘Directive (EU) 2023/2413 of the European Parliament and of the Council of 12 December 2023’ (Web Page, EUR-Lex) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023L2413.
3Ibid.
4Ibid.
5Ibid.
6Ibid.
