Fossil fuel subsidies in Australia reach $16.3 billion
Australian governments are expected to provide $16.3 billion in subsidies to fossil fuel industries in the 2025-26 financial year, according to new analysis.
The report from the Australia Institute, based on government budget papers and official announcements, estimates the subsidies equal about $31,020 every minute.
The analysis says support for coal, gas and oil products has increased nearly 10% over the past year.
What the numbers show
According to the report, national fossil fuel subsidies are projected to grow by 9.4% in 2025-26.
By comparison, spending on the National Disability Insurance Scheme (NDIS) is expected to rise by 7.6%.
Researchers say this means fossil fuel subsidies are currently growing faster than one of Australia’s largest social programs.
The largest subsidy: fuel tax credits
The biggest component of the subsidies is the federal government’s fuel tax credit scheme.
This policy refunds businesses the fuel excise they pay on petrol or diesel used for certain activities.
Industries that qualify include:
• Mining companies
• Farmers
• Tourism operators
• Businesses running heavy vehicles or machinery
The scheme is expected to cost about $10.8 billion this year, up from $10.2 billion last year.
Fuel excise currently sits at about 52.6 cents per litre and is adjusted every six months.
Why supporters defend the policy
Industry groups and some economists say the rebate system is justified.
Supporters argue fuel excise is traditionally collected to help fund road infrastructure.
They say businesses operating vehicles or machinery off public roads should not be required to pay the tax.
The scheme has been maintained by both Labor and Coalition governments.
Critics say subsidies encourage fossil fuel use
Environmental groups and policy analysts argue the subsidies undermine Australia’s climate goals.
Rod Campbell, research director at the Australia Institute, said most of the benefits flow to large companies, including multinational mining firms.
He said coal companies alone are expected to receive more than $1 billion in rebates this year.
Critics say reducing the subsidies could support the transition to cleaner energy and improve the federal budget.
Growing debate about energy policy
Some political and industry figures have also questioned the scale of fossil fuel support.
Matt Kean, chair of the Climate Change Authority, has argued that continuing large diesel rebates for mining companies while promoting renewable energy creates a contradiction in policy.
He said reliance on fossil fuels can also expose Australia to global price volatility and economic instability.
State government subsidies
The analysis also looked at state-level support for fossil fuel industries.
Estimated subsidies include:
• Queensland: about $2.2 billion
• Western Australia: about $400 million
• Northern Territory: about $355 million
• Victoria: about $61 million
• New South Wales: about $11 million
• South Australia: about $9 million
The report found Tasmania and the ACT do not currently provide fossil fuel subsidies.
What happens next
The debate over fossil fuel subsidies is likely to continue as Australia faces pressure to reduce emissions and accelerate the shift to renewable energy.
At the same time, industries that rely heavily on diesel and other fuels say sudden changes to the subsidy system could affect jobs and regional economies.