Major players in Australia's aviation industry have backed a report recommending a shift to biofuels to offset a possible carbon price and the rising cost of oil.
The CSIRO report states that biofuels made from sources including crop stubble and forestry residues are a viable option for the aviation industry.
The findings, launched in Sydney on Wednesday, have the support of airline giants such as Qantas, Boeing and Virgin.
Virgin group executive Merren McArthur said environmentally friendly fuels would benefit from government offsets if a carbon price was imposed.
"Fuel is always going to be a huge part of our costs," she told reporters. "If a carbon price is imposed, there will be offsets for this sort of fuel technology, so in theory it should be more competitive."
Speakers at the launch said even though significant investment would be needed to establish a commercially viable supply of biofuel, the long term benefits meant the industry would be able to remain competitive in the face of a carbon tax and oil price hikes.
Qantas head of fuel optimisation Peter Broshofsky said the airline expected biofuels would be available at competitive costs.
"For this to be successful we don't anticipate that there will be additional costs for biofuels," Mr Broshofsky said.
The report predicted a sustainable biofuel industry in Australia and New Zealand could cut the industry's greenhouse gas emissions by 17 per cent in 20 years, create more than 12,000 jobs and reduce reliance on imported aviation fuel.
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