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  • Writer's pictureGregory Andrews

Australia Must Stop Subsidising Fossil Fuels

The International Energy Agency and OECD have both reported that Australia spends billions of dollars each year subsidising fossil fuels despite the growing climate crisis. We allocate a staggering A$12 billion per annum in support to the fossil fuel industry.


The opportunity cost of these fossil fuel subsidies is equivalent to a staggering 140,000 additional teachers or 23 new world-class hospitals each year. But sadly, these subsidies aren't improving education or health outcomes. They are bolstering industries that harm our health and the environment. They are pushing the world into climate collapse.


Australia's global standing and interests are tarnished by our massive fossil fuel subsidies. Despite being home to a relatively small population, Australia ranks 15th in total greenhouse gas emissions and 8th in per capita emissions. Only Qatar and the United Arab Emirates are ahead of us as major fossil fuel producing nations. We are the third largest fossil fuel exporter in the world.


At the heart of Australia's fossil fuel addiction are the massive fossil fuel subsidies from our Federal Government. It tries the usual tricks to claim that they are not subsidies. But the OECD and International Energy Agency both assess that they are. These subsidies support exploration and extraction, infrastructure, transport, and export market assistance. They also extend to direct subsidisation of fossil fuel consumption. In the fiscal year 2021-22, Australia's fossil fuel subsidies amounted to a staggering $11.6 billion, with the Federal Government accounting for $10.5 billion of this. That's our tax-payers money that it's using to subsidise an industry destroying our future.


The Fuel Tax Credit Scheme amounts to an astounding $8 billion. This scheme funds a diesel fuel excise primarily for select industries - approximately half of it goes to mining. The cost of the scheme exceeds the entire annual budget allocated to the Australian Army!


As a trained economist, I know that subsidies can be an effective tool when they promote actions that are beneficial to society. For instance, they were pivotal in facilitating vaccine distribution during the COVID-19 crisis. But when subsidies are allocated to harmful industries, they are"perverse". Subsidising fossil fuels while concurrently aiming to transition away from them is akin to subsidising cigarettes while encouraging people to quit smoking.


Prime Minister Albanese's government has yet to indicate any intention to cease subsidising fossil fuels. And Australia's past history on this matter is also deeply troubling. After committing to phase out fossil fuel subsidies as part of a G20 pledge, Australia subsequently stated that no such subsidies exist! Documents revealed through freedom of information requests prove this wrong. They identify seventeen fossil fuel subsidies that should have been declared and phased out.


Fossil fuel subsidies encourage cancerous air pollution, drive climate change, strain our budget, hinder our transition to cleaner energy, and tarnish our global image. With the world entering climate collapse, Australia should be leading by example and urgently phasing out fossil fuel subsidies. Doing so will also free up resources for more valuable and important investments like education, health and renewable energy. It will pave the way for a sustainable and prosperous future. Evidence of escalating climate breakdown leaves no room for ambiguity. It's time to stop subsidising the problem and start investing in the solution.



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