While some debate exists around what defines a subsidy, the United Nations Environmental Program defines fossil fuel subsidies as financial contributions that benefit an external organisation. Like many other countries, Australia provides a range of subsidies that help prop up fossil fuel projects and profits. According to the International Monetary Fund (IMF), Australia spent an estimated $29 billion on direct and indirect fossil fuel subsidies in 2015, which accounted for 2.3% of the country’s GDP. More recently, The Australia Institute calculated that Australian state and federal governments provided AU$11.6 billion of fossil fuel subsidies in 2021-22. This is 56 times the budget of the National Recovery Resilience Agency, which is tasked with providing disaster recovery services and support, and more than the total expenditure on public schools in the same year ($9.7 billion).
There are several ways in which these subsidies are provided. The most substantial of these is the Fuel Tax Credit Scheme. This scheme refunded the cost of diesel fuel to some industries and accounts for $8 billion alone in 2021-22, a process that the OECD Inventory of Support for Fossil Fuels fits the subsidy parameters. The value of this subsidy is estimated to continue increasing, with a projected rise to $9.8 billion by 2024-25. Mining industries received about half of the Fuel Tax Credit Scheme subsidies, with $3.5 billion in 2021-22, while 12% went to companies involved in agriculture, forestry, and fishing.
A range of other subsidies are provided directly or indirectly to the fossil fuel industry in Australia. Other tax concessions on aviation fuel and support for the offshore oil and gas industry cost another $1.03 billion in 2021-22. In addition, the Petroleum Resource Rent Tax (PRRT) allows companies to deduct exploration and development costs from their taxable income, reducing the tax they pay. The International Monetary Fund estimated that Australia provided $9.7 billion of subsidies to oil and gas in 2021, even though according to some estimates, the oil and gas revenue paid to Australians in 2019 was only $3.52 billion. Other examples of fossil fuel subsidies in Australia include funding for infrastructure projects that support the fossil fuel industry, such as roads and ports. One example of this is the $19 million allocated to upgrading an oil jetty largely used by Santos gas company. Similarly, the Queensland government spent $744 million mainly on state-owned coal mines, coal-fired power stations and coal ports.
Australia has made many efforts to develop and implement public policies aimed at limiting or eliminating subsidies for fossil fuels. Some of these were proposed by the Labor (centre-left party) federal government after winning the 2023 federal election. For example, the climate change minister promised no government finance for new coal and gas fields and a commitment to redirect some gas and carbon capture project funding the previous center-right Coalition government to climate and environment programs. However, there is no proposal to remove the Fuel Tax Credit Scheme, and the country has been criticised for declining to join the COP27 partnership to phase out public subsidies for fossil fuels. In contrast, The Greens Party has been a vocal advocate for the complete elimination of fossil fuel subsidies and has proposed redirecting these funds toward renewable energy and other sustainable industries. This reflects data that indicates that most Australians do not want fossil fuels to be subsidised and instead would prefer that existing subsidies be redirected to areas such as healthcare and cost of living support. Many organisations are advocating for the removal of fossil fuel subsidies in reflection of this strong public sentiment. For example, the Australian Conservation Foundation has long called for an end to the practice. Similarly, the Australian Council of Trade Unions has called for the long-term phase-out of fossil fuel subsidies and their redirection towards a labor adjustment package for coal-fired electricity sector workers and communities.
As well as these peak groups, a wide range of local, grassroots organizations have run advocacy campaigns aimed at highlighting the economic, environmental, and social costs of these subsidies and have called for their elimination. Yet despite these efforts, fossil fuel subsidies persist in Australia, and there seems to be little political will to facilitate their removal in the short- to m.
This Post was submitted by Climate Scorecard Australia Country Manager Robyn Gulliver