Australia’s Fuel Tax Credits and the debate over fossil fuel subsidies

The Fuel Tax Credits Scheme costs the Federal Budget nearly $10 billion per year and largely benefits iron ore and coal miners.

Researchers at the OECD, IEA and IISD describe it as a fossil fuel subsidy. The OECD has called for its elimination. Australian Government and mining industry representatives dispute the use of the term subsidy, but not its cost to government or benefit to miners.

Key points:

  • The FTCS clearly meets the World Trade Organisation’s definition of ‘subsidy’, as the tax refund represents ‘government revenue that is foregone or not collected…such as tax credits’.
  • Organisations that explicitly call Australia’s FTCS a subsidy include the Organisation for Economic Cooperation and Development (OECD), the International Energy Agency (IEA), International Institute for Sustainable Development (IISD), Overseas Development International (ODI) and Oil Change International.
  • The International Monetary Fund (IMF) does not mention the FTCS specifically, but IMF fossil fuel subsidy estimates include the impact of the FTCS.
  • The OECD has called for the elimination of the FTCS.

Australia's Fuel Tax Credit and Fossil Fuel Subsidies