Australian truck fleet struggles to decarbonise

Australia’s road freight sector is struggling to decarbonise, despite a potential $36 billion opportunity in low-carbon liquid fuels, with regulatory fragmentation and infrastructure gaps hampering progress toward the nation’s 2050 net-zero target.

Heavy trucks currently account for nearly 40 per cent of transport-related greenhouse gas emissions and around seven per cent of Australia’s total emissions – a share projected to grow by 16 per cent by 2040 without stronger policy action and greater investment in zero-emission vehicle technologies.

The $36 billion opportunity

A report from the Clean Energy Finance Corporation and Deloitte, Refined Ambitions: Exploring Australia’s Low Carbon Liquid Fuel Potential, reveals that low-carbon liquid fuels could be worth $36 billion by 2050 while cutting Australia’s carbon emissions by 230 million tonnes over 25 years – almost half the nation’s current annual total.

“If we get the settings right, Australia can lead in clean fuels innovation and production,” said CEFC chief executive officer Ian Learmonth, identifying aviation, mining, heavy freight and defence as sectors where electrification remains difficult or unviable.

CEFC executive director Rupert Maloney emphasised Australia’s potential, saying the country “has all the ingredients to be a clean fuel superpower”.

However, the report warns that production costs remain higher than conventional fuels, while the lack of national mandates is a limiting factor when it comes to investor confidence and demand certainty.

Diesel’s enduring dominance

Despite growing interest in alternative fuels and electrification, diesel continues to dominate Australia’s freight system, particularly for long-haul routes, as evidenced by the century-old diesel engine’s prevailing presence at the 2025 Brisbane Truck Show.

While electric vehicles and hydrogen trucks show promise in urban and regional settings, their adoption in heavy freight faces constraints from range limitations, infrastructure gaps and cost considerations.

The Australian Renewable Energy Agency estimates approximately 165 freight charging hubs will be needed nationwide to enable a fully electrified road freight industry, strategically placed along major corridors such as the Hume Highway.

Dr Elnaz Irannezhad from the University of New South Wales highlighted the fundamental challenge: “Which comes first – the vehicles or the charging stations?” 

Without widespread charging infrastructure, freight companies hesitate to adopt electric trucks, yet without more low-emission vehicles on roads, there is little demand to build infrastructure.

Breaking the deadlock with strategic investment

The CEFC will invest up to $6 million alongside electric fleet specialist Zenobē, which will lease 60 battery electric trucks to Woolworths for last-mile urban deliveries across New South Wales and Victoria, where trucks can return to base for overnight charging.

“Investing in Zenobē’s shared infrastructure model will allow major logistics and freight operators and users to transition to electric vehicles without the significant capital expenditure and complexity associated with the uptake of BETs,” explained CEFC head of infrastructure Julia Hinwood.

This investment proves particularly timely given e-commerce growth, including supermarket grocery deliveries, with nearly 10 million Australian households purchasing online in 2024 and domestic e-commerce hitting a record $56 billion.

Industry calls for comprehensive support

Heavy Vehicle Industry Australia recently wrote to Minister for Climate Change and Energy Chris Bowen and Minister for Infrastructure Catherine King, calling for a technology-neutral incentive scheme to help decarbonise heavy vehicles.

HVIA proposed the national scheme should include subsidies for purchasing zero- and low-emission trucks, support for upgrading existing diesel trucks with emissions-reducing technologies, and funding for infrastructure development including charging and refuelling stations.

This aligns with the Productivity Commission’s interim report on the net-zero transition, which noted that “incentives for heavy vehicle operators to reduce emissions are inadequate” and urged government introduction of “a new, technology-neutral policy to reduce emissions from heavy vehicles”.

Regulatory inconsistencies hamper progress

HVIA has highlighted pressing needs to address regulatory inconsistencies across state and territory jurisdictions, particularly concerning axle weight limits for zero-emission heavy vehicles.

New South Wales allows eight tonnes on the steer axle under a two-year trial, while Victoria limits it to 7.5 tonnes with a restrictive three-year permit. Queensland and South Australia have introduced their own conditions, creating a fragmented regulatory landscape that challenges operators seeking to invest confidently in zero-emission fleets operating across multiple jurisdictions.

The Productivity Commission has proposed reviewing several key areas to improve policy settings for freight decarbonisation, including lowering the Safeguard Mechanism emissions threshold from 100,000 to 25,000 tonnes of CO₂ annually, reviewing Australian Carbon Credit Units calculations, extending Fringe Benefits Tax electric vehicle exemptions, and reforming the Road User Charge system where renewable diesel faces identical taxation to conventional diesel.

Europe shows the way forward

Australia’s slow path toward decarbonisation contrasts with significant European progress, where targeted incentives have successfully driven zero-emission vehicle adoption.

The International Council on Clean Transportation reported that despite an overall 20 per cent drop in truck sales across Europe, zero-emission heavy-duty vehicle sales rose by 45 per cent in the first quarter of 2025 compared with the previous year.

In the Netherlands, combining financial incentives and regulatory measures – including subsidies, toll exemptions and zero-emission zones – has enabled zero-emission trucks to capture 83 per cent of the light- and medium-duty market in some municipalities.

The Dutch Energy Investment Allowance scheme encourages businesses to adopt energy-saving technologies by deducting investment costs from their taxable income.

Similarly, the United Kingdom is leveraging coordinated policy and investment to scale clean freight technologies, with the first hydrogen freight corridor opening on the M4 in summer 2026.

Backed by a £14 million HyHaul Mobility investment in refuelling stations supporting up to 30 hydrogen fuel cell heavy goods vehicles, the government-led project involves Novuna, Scania, Reynolds Logistics and Protium.

Workforce strategy essential for transition

Australian industry groups are urging stronger government action and a coordinated national workforce strategy to equip technicians, engineers, emergency responders and regulators for the transition to net-zero freight

HVIA established the HVIA-LITE Skills and Training Working Group, developing specialised training pathways focused on electric heavy vehicles including high-voltage safety, emergency procedures and installation of components.

HVIA is also piloting an Automotive Academy program for years 10-12 students to fast-track apprenticeships in heavy vehicle trades.

Apprentice retention remains challenging, with close to 50 per cent of those in the heavy commercial vehicle sector – especially aged 15 to 24 – not completing their training.

Leveraging Australia’s raw material advantage

Australia currently exports $3.9 billion worth of raw materials such as canola oil and animal fats including tallow, key feedstocks for producing low-carbon liquid fuels including renewable diesel, biodiesel and e-fuels.

However, Australia lacks refining capacity to fully capture the value of these resources.

Developing domestic LCLF production could reduce emissions while utilising existing agricultural practices without competing with food production.

“We export the raw materials but miss the opportunity to build the industry here at home,” said Mr Maloney.

“This is about regional development, national resilience and emissions reduction, all at once.”

Without action and investment, Australia risks missing out on a globally competitive clean fuels industry and the chance to secure sovereign fuel supply – critical given 80 per cent of the nation’s liquid fuel was imported in 2023, costing $50.7 billion and leaving the country vulnerable to supply chain disruptions.

“Clean fuel plants could revitalise manufacturing hubs and create skilled careers in some areas hit hardest by the decline of fossil fuels,” Mr Maloney said.

“But we need investment commitments this decade to avoid missing the window.”

Strategic priorities for decarbonisation

The CEFC report outlines seven key actions critical to advancing freight decarbonisation in Australia: improving market access through trade relationships, de-risking investments using concessional finance, reducing transaction challenges with standardised contracts, establishing credible demand signals including blending mandates, increasing transparency of demand, supply and feedstock data, supporting innovation in advanced fuels including hydrogen-based e-fuels, and enhancing coordination across the entire value chain from feedstock supplier to fuel producer to end user.

“With the right market signals and collaboration, Australia can build a globally competitive clean fuels industry and lead our region in climate-era innovation,” Mr Maloney concluded.