The case for domestic biofuel production from waste, tallow, and dairy processing byproducts
New Zealand spends approximately $8–10 billion every year importing refined petroleum products. Every litre of petrol, diesel, and jet fuel arrives on a tanker from South Korea or Singapore, refined from Middle Eastern crude. Since the closure of the Marsden Point refinery in 2022, we have had no domestic refining capacity at all. Our fuel security now depends entirely on international supply chains that, as the Strait of Hormuz disruptions in early 2026 demonstrated, are fragile by design.
This is not just an energy problem. It is a trade deficit problem, a national security problem, and an economic development problem that New Zealand has the raw materials to solve.
The Trade Deficit We Don't Talk About
Fuel imports are the single largest driver of New Zealand's bilateral trade deficits. In the 12 months to March 2025, South Korea supplied 48% of our imported fuel and Singapore supplied 33%. Our trade deficit with Korea reached nearly $4 billion in the 12 months to December 2024 — but strip out the fuel, and that trade relationship is broadly balanced.
The same pattern holds with Singapore, where our deficit sits at approximately $5.3 billion. We are not running a trade deficit because we lack things to sell. We are running it because we import all our fuel.
"New Zealand exports raw tallow at commodity prices and reimports refined biofuels at premium prices. We are paying other countries to add value to our own waste streams."
The Feedstocks We Already Have
Here is what makes this problem so frustrating: New Zealand already produces the raw materials for significant biofuel production. We just export them.
Beef Tallow — Our red meat processing sector produces approximately 150,000 tonnes of tallow per year from around 60 export-certified plants. Almost all of it is shipped offshore, where refiners like Neste and Chevron convert it into biodiesel and Sustainable Aviation Fuel. Z Energy tried processing tallow domestically at its Wiri plant, investing $26 million, but was priced out when global tallow demand for SAF feedstock drove prices from $450 per tonne to over $2,000. The plant was mothballed in 2020 and the site sold in 2022. We export the raw material cheaply, then buy back the finished product at a premium.
Dairy DAF Sludge — Fonterra and other dairy processors generate thousands of tonnes of Dissolved Air Flotation sludge annually as a wastewater byproduct. This lipid-rich material has proven potential for both biodiesel production and biogas generation through anaerobic digestion. At Fonterra's Eltham facility alone, 10–20 tonnes of DAF sludge is produced daily — currently requiring costly consented disposal. Anaerobic co-digestion transforms this disposal cost into an energy asset.
Forestry Residues — Scion's NZ Biofuels Roadmap identified plantation forestry as our largest biomass resource with the greatest expansion potential. Millions of tonnes of forest slash, stumps, and off-cuts are discarded annually, representing an untapped feedstock for thermochemical biofuel production.
The Circular Economy Opportunity
The most compelling pathway is not competing with global commodity markets for tallow — the Z Energy experience shows that doesn't work at our scale. The real opportunity is in waste-to-energy: converting the organic waste streams we already pay to dispose of into biogas, biomethane, bio-fertiliser, and carbon credits.
"When feedstocks are waste streams with negative cost — where generators pay gate fees to get rid of them — the economics of biofuel production are inverted. You earn revenue at the input, not just the output."
Anaerobic co-digestion of sewage sludge, DAF sludge, food waste, and green waste produces biogas that can be upgraded to biomethane — a direct, low-emission substitute for natural gas that can be injected into existing pipeline infrastructure. The GasNZ Biomethane Strategy & Action Plan (March 2026) estimates that every petajoule of biomethane produced delivers $61 million in systemwide benefits to New Zealand, including energy security, waste diversion, emissions reduction, and bioCO₂ revenue. At the 5 PJ target by 2035, those benefits reach $305 million annually.
This is not a theoretical proposition. Alimentary Systems' Bio-Resource Recovery Plant technology is already operational at multiple sites across New Zealand — at Nelson's Bell Island, Porirua, Marlborough, and Taranaki. The technology combines patented anaerobic co-digestion with thermal hydrolysis to boost biogas production by 400% compared to single-feedstock digestion, while producing certified organic bio-fertiliser that replaces synthetic nitrogen imports.
What Needs to Change
New Zealand remains one of the few developed nations without a biofuel mandate. The Sustainable Biofuels Obligation Bill was introduced in 2022, then abandoned in 2023. Over 60 countries worldwide have adopted biofuel mandates. The EU, UK, US, and Australia all provide a combination of mandates, tax credits, and capital grants to support domestic biofuel production. We have none.
Three policy interventions would shift the dial:
First, reinstate and strengthen the biofuel obligation with targets realistic for domestic waste-to-energy production, not just imported biofuels. Second, extend the NZ Emissions Trading Scheme to include biogas and biomethane production from waste as an eligible activity — the current exclusion means that the single most cost-effective emissions abatement pathway in New Zealand receives no ETS recognition. Third, introduce feedstock retention policies that encourage domestic value-addition rather than raw commodity export.
"We are paying $8–10 billion annually to import fuel while simultaneously paying to landfill the organic waste that could produce it. The economics of this position are untenable."
A Choice We Need to Make
New Zealand has a straightforward choice. We can continue to export raw materials, import finished fuels, and run structural trade deficits. Or we can build the domestic infrastructure to convert our waste streams into energy, fertiliser, and carbon credits — creating regional employment, strengthening energy security, and reducing emissions.
The feedstocks exist. The technology is proven. The economics work when you value the full system — not just the fuel, but the waste diverted from landfill, the synthetic fertiliser replaced, the emissions avoided, and the energy security gained.
The question is not whether New Zealand can produce biofuels domestically. The question is how much longer we choose not to.
Alimentary Systems Limited (ASL), a New Zealand cleantech company specialising in anaerobic co-digestion of organic waste at wastewater treatment facilities. ASL produces biogas, bio-fertiliser, and carbon credits across operational sites in Nelson, Porirua, Marlborough, Taranaki, Motueka, Dunedin, and the Waikato. Matthew is an Edmund Hillary Fellow.
Learn more: asl.co.nz