Fossil Fuel Subsidies in the 2023-24 Federal Budget

by Rod Campbell


The Fuel Tax Credit is Australia’s biggest fossil fuel subsidy, and indeed one of the largest expenditure items in the Federal Budget. Weighing in at $9.6 billion in 2023-24 it is expected to cost $41.1 billion over the next four years.

This tax break reduces the incentive for major fossil fuel users to electrify or invest in more efficient equipment. Worse still, over $1 billion of this cost goes to the coal industry, not only subsidising its fuel use, but making it cheaper to mine coal.

The increasing cost of the Fuel Tax Credit, and relatedly the increasing revenue expected to be generated from petrol and diesel excise ($23 billion in 2023-24 up to $26 billion in 2026-27) reflects “an expected increase in the use of fuels that are eligible for the Fuel Tax Credits Scheme.” In other words, the Federal Government is expecting Australia to use more diesel and petrol than ever before in 2027. This begs the question of how the country is going to meet its climate goals using more fossil fuels, not less.

Growth in fossil fuel use is also expected in aviation – tax breaks for aviation fuel cost around $1.2 billion in 2022-23 and are expected to grow by 7.9% over the next four years.

There’s also $61.7 million worth of measures that assist fossil fuel production in other ways. Many of these date from the Morrison Government’s Gas Fired Recovery and now operate under different names.

For example, the Albanese Government’s Future Gas Strategy is funded from the Gas Fired Recovery’s Strategic Basin Plans, with $6.7 million set to “support Australia’s energy system to become cleaner, cheaper and more reliable while maintaining our international reputation as a trusted energy supplier to the region.”

Quite what that means is unclear, but given that yesterday’s Northern Territory Budget highlights $1.5 billion of Commonwealth money to help increase demand for fracked gas in the NT, it seems likely that it is intended to assist with fossil gas extraction.

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