The Renewable Fuel Scheme (RFS) was established under the Energy Security Safeguard and the NSW Hydrogen Strategy to create a financial incentive for the production of green hydrogen in NSW. Green hydrogen is hydrogen produced using renewable electricity that releases close to zero emissions.
Released in November 2025, the NSW Renewable Fuel Strategy sets a clear and achievable pathway to grow the NSW renewable fuel industry. As a part of the Strategy, the RFS will be expanded to support the production of biomethane from 2028.
Biomethane is a low carbon alternative to fossil gas, helping to reduce emissions while supporting energy security.
On 17 May 2026, the Government announced it will further expand the Renewable Fuel Scheme to include low-carbon and renewable liquid fuels and will consult with industry later this year on options. This is recognising their role in strengthening fuel security amid evolving supply challenges. Low carbon liquid fuels, such as sustainable aviation fuel, renewable diesel and biodiesel, can help reduce emissions in sectors that are difficult to electrify, including aviation, freight and heavy transport.
Investing in the production of renewable gases and low-carbon liquid fuels is critical to achieving NSW emission reduction targets and net zero by 2050. This will also help our industries remain competitive as international markets decarbonise. It will also help us:
drive economic growth and job opportunities
improve fuel security
decarbonise our hard-to-abate sectors
How the RFS works
The RFS is a certificate scheme, like the Energy Savings Scheme (ESS) and Peak Demand Reduction Scheme (PDRS).
Renewable fuel producers can create a certificate for every gigajoule (GJ) of renewable fuel they produce. Producers can sell certificates for revenue based on the market rate of certificates. Liable parties must obtain and surrender certificates to meet their share of the scheme’s renewable fuel production target/s or pay a penalty for a certificate shortfall. This creates a financial incentive to produce renewable fuel and supports projects to become commercially viable.
Learn more about the RFS by reading our frequently asked questions (FAQs).
Please email us if you would like more information at [email protected]
RFS expansion
Expansion to biomethane
The NSW Government is committed to supporting hydrogen projects that are already progressing under the existing scheme. We intend to make amendments to establish a target of up to 1 million GJ from 2027 to 2037 with a $17.50 penalty rate for first-mover green hydrogen projects.
We also intend to make amendments so the RFS can support biomethane from 2028. This will include establishing a biomethane and green hydrogen target that increases to 8 million GJ by 2038 with a $10.50 penalty rate.
Once these amendments are passed in 2026, the scheme should have 2 targets:
- a 2027 to 2037 first-mover only green hydrogen target, increasing to 1 million GJ by 2030, with a $17.50 penalty rate
- a 2028 to 2044 biomethane and green hydrogen target, increasing to 8 million GJ by 2038, with a $10.50 penalty rate
- annual targets will be phased to account for expected production volumes, reaching a combined total of 8 million GJ by 2032.
Expansion to low-carbon liquid fuels
Low-carbon liquid fuels help cut emissions in harder-to-electrify industries such as aviation, freight and heavy transport, while strengthening NSW fuel security and supporting regional development.
The NSW Government will consult industry throughout 2026 to develop options to further expand the Renewable Fuel Scheme to low-carbon liquid fuels such as sustainable aviation fuel, renewable diesel and biodiesel.
Amendments in 2025
In November 2025, the Energy Legislation Amendment Bill 2025 was passed.
This included amendments to the scheme for green hydrogen in the Electricity Supply Act 1995:
- stating the scheme commences on 1 January 2027
- stating the scheme is not enforceable before 1 January 2027
- administrative changes aligned to the scheme commencement date.
This also included amendments to the scheme for green hydrogen in the Electricity Supply (General) Regulation 2014:
- removing the 2024, 2025 and 2026 hydrogen targets
- reducing the 2027 hydrogen target from 1,780,000 GJ to 180,000 GJ
- administrative changes aligned to the scheme commencement date.
Consultation on the RFS design
In August 2024, we consulted on the development of a new renewable fuel strategy for NSW. Part of this consultation included seeking feedback on whether the RFS design should be expanded and have additional renewable fuels and liable parties.
Visit the consultation page to stay updated on the outcomes.
Consultation on the RFS rule
The scheme rule will set out the eligibility requirements for creating certificates for renewable fuel production.
Between December 2023 and February 2024, we consulted on a draft rule for green hydrogen. The feedback we received during the consultation was used to prepare an updated draft rule.
Read the updated draft RFS Rule
Learn more about the public consultation process, the feedback we received and our current position on the proposals for the rule by reading:
We will continue to engage with industry on the development of the scheme rule in 2026.
Get involved
If you wish to receive email updates about the RFS, including how to be part of future research and consultation, please submit your details below.