Australian governments subsidising fossil fuel use by more than $30,000 a minute, analysis finds | Fossil fuels

Australian federal and state government subsidies that encourage the use of fossil fuels and help fuel the climate crisis will reach $16.3 billion this year, after jumping almost 10%, according to a new analysis.

It found federal and state governments would pay or forgo the equivalent of $31,020 per minute in 2025-26 to subsidize companies producing and using coal, gas and especially oil, mainly in the form of diesel.

Progressive think tank Australia Institute’s annual analysis reveals fossil fuel subsidies are now growing at a faster rate than funding for the National Disability Insurance Scheme (NDIS), which has been criticized in the past for its exorbitant costs.

Drawing on government budget documents and announcements, the institute said national support for fossil fuels is expected to increase by 9.4%. The cost of the NDIS is expected to increase by 7.6%.

The largest subsidy has been the federal government’s fuel tax credit scheme, which reimburses mining companies, farmers, tourism operators and other industries for excises paid on petrol and diesel.

Most consumers pay an indexed tax – currently 52.6 cents per liter, which increases every six months – when they fill up their car. Companies that use this fuel to operate vehicles on private roads, operate heavy vehicles on public roads or purchase diesel to operate machinery are eligible for a rebate. The project is expected to cost $10.8 billion this year, up from $10.2 billion last year.

The credit system has been maintained under Labor and Coalition governments and is supported by lobby groups such as the Minerals Council of Australia. Supporters say fuel excises are collected to fund roads and that companies that use the fuel to operate cars and equipment on roads and private property should not have to pay them.

Critics of the plan, including the Australia Institute, say the overwhelming majority of fuel excise taxes contribute to general budget revenues and are not explicitly linked to road construction and maintenance. They say the rebates encourage greater consumption of fossil fuels and run counter to policies that incentivize companies to adopt low-emission vehicles and other technologies.

Rod Campbell, director of research at the Australia Institute, said the main benefits of this program were multinational mining companies. Coal miners were to receive more than $1 billion this year.

“Reducing subsidies like these, which make the community and climate worse off, is an obvious priority for any government that says it is concerned about fiscal outcomes, inequality or climate change,” he said.

Campbell said those calling for a reduction in the subsidy included the Australian Council of Trade Unions, mining company Fortescue, the Australian Academy of Science Technology and Engineering and the Labor Environment Action Network. Some have backed a proposal from think tank Climate Energy Finance to cap corporate rebates at $50 million a year.

Matt Kean, chair of the Government’s Climate Change Authority and former NSW Liberal treasurer, also supported a reduction. He told an Australian Financial Review event in October that the idea of ​​continuing to give big mining companies a discount on diesel fuel rather than doing more to help Australian consumers switch to renewable energy was “insane”.

Kean told Guardian Australia on Wednesday that fossil fuels were already contributing to climate instability, and that the war in the Middle East was a reminder that “dependence on fossil fuels also leads to unwanted price volatility and economic instability.” “The sooner we move to renewable energy, the more energy independence we will have,” he said.

Campbell said the government signed a declaration on the transition away from fossil fuels at the Cop30 climate summit in Belém, Brazil, last year and should act on it. The countries that signed the declaration said they recognized the need to “phase out inefficient fossil fuel subsidies as soon as possible.”

At a state level, the institute found Queensland provided $2.2 billion in subsidies, mainly to state-owned mines, power stations and ports. Western Australia provided about $400 million in the most recent year for which there is data, the Northern Territory $355 million, Victoria $61 million, New South Wales $11 million and South Australia $9 million. There were no fossil fuel subsidies in the Tasmanian and ACT budgets.

Federal Treasurer Jim Chalmers’ office did not respond to questions about the report before its release.