Australian Fossil Fuel Subsidies Skyrocket to $16.3 Billion Annually
According to a comprehensive analysis by the Australia Institute, federal and state government subsidies that promote fossil fuel use and exacerbate the climate crisis are projected to soar to $16.3 billion in the 2025-26 financial year. This represents a significant increase of 9.4% from the previous period, highlighting a troubling trend in national financial support for coal, gas, and oil industries.
Subsidies Outpace Critical Social Programs
The report underscores that fossil fuel subsidies are now growing at a faster rate than funding for the National Disability Insurance Scheme (NDIS), which has faced scrutiny over cost management. While NDIS costs are forecast to rise by 7.6%, fossil fuel support is expanding more rapidly, raising questions about budgetary priorities in the context of climate action and social welfare.
On a per-minute basis, these subsidies equate to $31,020, illustrating the immense scale of government expenditure that indirectly fuels environmental degradation. The analysis, based on official budget papers and government announcements, points to a systemic issue where public funds are channeled into industries contributing to global warming.
Fuel Tax Credit Scheme Dominates Subsidy Landscape
The largest component of these subsidies is the federal government's fuel tax credit scheme, which is expected to cost $10.8 billion this year, up from $10.2 billion last year. This program refunds excise taxes on petrol and diesel to businesses such as mining companies, farmers, and tourism operators that use fuel for vehicles on private roads or machinery.
Supporters, including lobby groups like the Minerals Council of Australia, argue that the excise is intended for road funding and should not apply to off-road use. However, critics, including the Australia Institute, contend that most excise revenue goes into general budget funds rather than specific infrastructure projects, thereby incentivizing higher fossil fuel consumption and undermining efforts to transition to cleaner technologies.
Growing Calls for Reform and Climate Alignment
Rod Campbell, research director at the Australia Institute, emphasized that the primary beneficiaries of these subsidies are multinational mining corporations, with coal miners alone set to receive over $1 billion this year. He stated, "Cutting back subsidies like these, which harm both the community and the climate, should be a priority for any government focused on budget integrity, inequality, or climate change."
Campbell noted that diverse groups, including the Australian Council of Trade Unions, mining company Fortescue, and the Labor Environment Action Network, advocate for reducing these subsidies. Some have proposed capping rebates at $50 million per company annually, as suggested by Climate Energy Finance.
Matt Kean, chair of the government's Climate Change Authority and a former New South Wales Liberal treasurer, has also endorsed reductions, calling the current system "insane" for favoring big miners over renewable energy initiatives for consumers. Kean warned that reliance on fossil fuels not only drives climate instability but also exposes the economy to price volatility, as seen in global conflicts.
State-Level Subsidies and International Commitments
At the state level, Queensland leads with $2.2 billion in subsidies, primarily supporting state-owned mines, power stations, and ports. Other contributions include approximately $400 million from Western Australia, $355 million from the Northern Territory, $61 million from Victoria, $11 million from New South Wales, and $9 million from South Australia. Tasmania and the Australian Capital Territory report no fossil fuel subsidies in their budgets.
The analysis comes as Australia faces pressure to align with international climate agreements. At the COP30 summit in Belém, Brazil, the government signed a declaration committing to phase out inefficient fossil fuel subsidies, yet current trends suggest a disconnect between policy and practice.
The office of federal treasurer Jim Chalmers did not respond to inquiries about the report prior to its publication, leaving questions unanswered about future budgetary adjustments in light of these findings.
