The push for net-zero emissions globally is encountering a significant roadblock.

Despite countries pledging to achieve net zero, there’s a considerable gap between promises and action. To combat climate change, emissions must be reduced by 43% by 2030 and 60% by 2035. This is a major challenge for industries like construction, mining, transport, agriculture, and maritime.

To achieve net zero, a critical step is to make existing vehicle fleets cleaner, especially in industries still relying on outdated engines. Construction is a major player in this challenge, contributing 23% to global emissions. The industry’s heavy dependence on fossil fuels makes it impossible to meet global emission goals without significant carbon-cutting efforts.

As with most industries, electrification represents the most promising long-term solution for eliminating construction’s emissions. Yet, the path to widespread adoption faces hurdles. By 2030, electric alternatives are estimated to be available for only 40% of construction equipment and firms also face significant economic disincentives to abandoning existing assets, particularly before the end of their useful life.

Put simply, a strategy of waiting for electrification to reach maturity is incompatible with Australia’s net zero commitments. We must pursue alternatives in the interim. That is why the Australian Constructors Association (ACA) is advocating for a tiered approach to decarbonising construction that embraces the long-term ambition of electrification while pragmatically adopting other low carbon liquid fuels in the interim.

Renewable diesel is the most cost-effective, feasible and readily deployable transition fuel where electric options are unavailable. Renewable diesel enables equipment and machinery to live out their working life while zero emission technology matures. Renewable diesel is also the most promising option for applications where zero emission technology does not emerge. However, a key challenge in Australia is the lack of available renewable diesel due to the absence of domestic production. The fuel is only accessible through costly direct importation.

Without a reliable and affordable supply of renewable diesel, it will not be possible to reduce construction emissions to levels compatible with national emission reduction targets. This supply will not materialise by accident. While readily available and used extensively in construction overseas, renewable diesel is only available in Australia through direct importation at a high-cost premium. While some refineries are in the early stages of development, the industry needs a catalyst. Domestic production must be urgently scaled if we are to meet our net zero ambition.

A reliable supply of renewable diesel does not only depend on refinery capacity. Just as petroleum supply is limited by access to oil reserves, renewable diesel supply can only grow as fast as the supply of its feedstock. A supply chain of suitable feedstocks needs to be developed to underpin a domestic renewable diesel industry.

The renewable diesel adoption gap between Australia and the rest of the world reflects a policy gap. While the proliferation of emissions standards and low carbon liquid fuel policies in the US and Europe are prompting overseas supply chains to decarbonise, Australian firms face fewer incentives to accelerate adoption. Some companies are actively boosting decarbonisation investments on their own initiative at cost premiums, but the majority are waiting for clear policy signals from government.

There are strong international precedents for such policies. Low carbon liquid fuel incentives are now commonplace in Europe and in an increasing number of US states. In the US, renewable diesel production is expected to more than double by the end of 2025 thanks to a string of federal and state-based policies. These incentives are leading to significant investments into renewable diesel infrastructure overseas, including the conversion of existing petroleum refineries into renewable diesel refineries.

By contrast, proposed Australian renewable diesel refineries are operating in a policy vacuum which is impacting investment. To bridge this gap, ACA is calling on the Australian Government to lead the development of a low-carbon liquid fuel policy. This policy should outline a clear path for scaling a sustainable renewable diesel industry in Australia using domestic feedstocks. A key objective should be the creation of a comprehensive regulatory framework, instilling confidence in investments and empowering organisations to adopt renewable diesel. The time for action is now to meet our net-zero ambitions.

By Jon Davies, CEO, Australian Constructors Association.