Labor’s Approval of Mine Projects Threatens Coal Subsidies Amid Climate Concerns
Coal companies to reap billions more – Recent decisions by the Albanese government may unlock an additional $6.2 billion in public subsidies for coal companies, according to a new report from the environmental advocacy group Lock the Gate. This projection emerges as the government prepares to endorse half of the proposed mining projects under review, with implications for the fuel tax credit system that currently offers refunds to industries for diesel expenses. The analysis, released by the group, highlights how the scheme effectively subsidizes coal operations, potentially creating a financial incentive that clashes with broader climate goals.
A Growing Campaign for Reform
As the government moves forward with its mining approvals, an internal push within the Labor Party seeks to limit the scope of the fuel tax credit scheme. Over 300 Labor branches, alongside unions, climate activists, and mining magnate Andrew Forrest, have joined this effort to cap the refunds. The initiative aims to redirect funds toward addressing climate-related costs rather than subsidizing diesel use. The scheme, which refunds industries for the 52.6 cents per liter excise on petrol and diesel, has already allocated $47 billion to the budget over the next four years, with projections of $10.7 billion in 2026-27 and $12.8 billion by 2029-2030.
Of this total, more than $1 billion annually is directed to coalmine operators, a figure that could rise significantly if new projects receive approval. The issue has sparked debate, particularly as energy prices remain volatile and the government faces pressure to align its policies with climate action. While the Treasury has outlined the financial impact, critics argue the subsidies are disproportionately favoring coal while neglecting the broader economic consequences.
Eligibility and Usage of Diesel
The fuel tax credit applies to businesses that utilize diesel in private vehicles or machinery, such as mining trucks. This means companies are not required to pay the full excise on diesel used outside public roads, effectively reducing their costs. Meanwhile, households and most businesses bear the full tax burden, though it was temporarily reduced for four months due to a spike in global fuel prices linked to the Middle East conflict.
Diesel accounts for 35% of total fuel consumption in Australia, with a further 15% used specifically at coalmines. The scheme’s supporters, including the Minerals Council of Australia, maintain that the excise is meant to fund road infrastructure and that diesel used in non-road contexts should be exempt. They assert that the policy is essential for maintaining competitiveness in regional industries, from mining to agriculture.
Environmental Concerns and Policy Conflicts
Opponents of the scheme, however, argue that the excise is not strictly tied to road maintenance and that the refunds create an indirect subsidy for fossil fuel use. A recent investigation by the Guardian and ABC’s Four Corners revealed that BHP, one of Australia’s largest mining companies, spent hundreds of millions on diesel trucks for its Pilbara operations despite internal documents acknowledging the move as “misaligned” with decarbonization targets. In the 2025 financial year, BHP received an estimated $622 million in fuel tax credits, a figure that underscores the scheme’s financial impact on major coal players.
Supporters of the policy defend its necessity, stating that it prevents businesses from paying taxes on fuel not directly related to public transport. Yet critics claim it undermines another key initiative—the safeguard mechanism—designed to encourage industries to adopt cleaner technologies. With coal mining and combustion contributing to rising disaster costs, the debate over subsidies has intensified, as environmental and economic pressures collide.
Proposed Cap and Policy Shifts
Some within the Labor Party, including the conservation-focused arm Lean, are advocating for a cap on the scheme. Their proposal limits annual refunds to $50 million per company, targeting large miners while excluding smaller operators like farmers. This approach would align with a broader effort to eliminate “disincentives for decarbonisation” by modifying the party’s national policy platform. Labor MP Jerome Laxale has publicly endorsed the campaign, with several colleagues reportedly supporting similar measures behind closed doors.
Lock the Gate’s acting national coordinator, Georgina Woods, has emphasized the need for policy adjustments. In a
“Households are struggling with rising energy bills and insurance costs, and that will worsen as the climate crisis escalates,” she said. “Pollution from mining and burning coal is fuelling rising disaster costs across each state and territory, and the annual damage bills from increased flood, bushfire, storm, cyclone and hailstorms could reach over $40bn in the next 25 years.”
Woods argues that the current system rewards coal companies with billions in public funds while discouraging the transition to cleaner vehicles. She suggests that these resources would be better allocated to offset the economic burden of climate change.
Energy & Resource Insights, a consultancy linked to the climate advocacy group Sunrise Project, has highlighted the scale of proposed coal developments. The firm estimates that 45 additional projects in New South Wales and Queensland could lead to $6.2 billion in diesel refunds. Of these, 22 have environmental impact statements detailing expected fuel consumption. One expansion—Glencore and Yancoal’s Hunter Valley project—alone could secure $1.7 billion in rebates, making it the largest coal development in NSW’s history.
While the government remains steadfast in its support for the scheme, the debate reflects a broader tension between economic growth and environmental responsibility. As the Labor Party prepares for its national conference, the discussion over fuel tax credits has become a focal point for reshaping Australia’s energy policy. With billions at stake and the climate crisis intensifying, the question remains: will the policy continue to prioritize fossil fuels, or will it adapt to reflect a more sustainable future?
