Australia's DCCEEW Launches Consultation on Proposed Sustainable Aviation Fuel Mandate

Australia's Department of Climate Change, Energy, the Environment and Water opened a public consultation on 18 August 2026 on the design of a demand mechanism to accelerate uptake of low carbon liquid fuels, including sustainable aviation fuel. Under the proposed framework, obligated entities — primarily relevant fuel suppliers — would need to meet volumetric SAF requirements during a market formation period running from 2029 to 2035, termed Phase 1. After that period, obligated entities would transition to carbon-intensity targets under Phase 2, which would grant greater flexibility and give preference to SAF options delivering greater lifecycle emissions reductions.

For any shortfall in SAF volume or carbon-intensity reduction, obligated entities would be required either to surrender carbon credits or to pay a government buy-out price. The consultation seeks views on appropriate target ranges, the level and adjustment of the buy-out price, credit-banking and credit-market features, implementation challenges in transitioning from volumetric to carbon-intensity targets, and certification requirements affecting both domestic recognition of imported SAF and foreign recognition of Australian SAF exports.

At the highest proposed 2030 target of 450 million litres per year, Australia's effective mandate would represent approximately 5.8% of overall SAF production, below the UK's 10% mandate and just under the EU's 6% target. DCCEEW said this reflects Australia's relative immaturity in the market, noting the EU and UK already have 2% SAF mandates in place while Australia currently has no commercial-scale domestic SAF production facilities. The Australian government has already committed AUD 1.1 billion over a decade through its Cleaner Fuels Program to support private investment in low carbon liquid fuels, though SAF can command a cost premium of up to five times that of fossil kerosene.

This consultation places Australia among a growing group of jurisdictions building SAF demand mechanisms after the EU and UK, but starting from a lower base and a slower ramp. Phasing volumetric targets ahead of carbon-intensity targets lets regulators lock in physical supply growth first, then reward deeper decarbonisation once a market exists to reward it.

The mechanism only works if buy-out prices and credit-banking rules are set firmly enough to make SAF investment bankable despite a premium DCCEEW itself puts at up to five times fossil kerosene. Without enough private demand locked in through the mandate, the AUD 1.1 billion in public supply-side support risks funding capacity that has no buyer at scale.

The consultation's outcome on certification — specifically whether imported SAF will count toward Australian obligations and whether Australian SAF will be recognised abroad — will determine whether this becomes a domestic production driver or largely a compliance-purchasing exercise. Submissions on target ranges and buy-out pricing will shape whether the 2029 start date arrives with an effective mandate or a nominal one.