Labor has announced a $1.1 billion kickstart for local low-carbon liquid fuels production in a move that could open new markets for Australian farmers while helping decarbonise some of the nation's hardest-to-abate sectors.

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Feedstocks such as canola, sorghum, sugar and agricultural waste would power the industry, offering new revenue streams for regional producers if the plan is fully realised.

Peak industry groups have long lobbied for such an initiative and described the funding envelope as a major step forward for the nascent industry.

The federal government has announced a $1.1

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