Diesel rebates for miners and a new EV tax? Australia’s climate policy double-think

What?! Australia gives big miners billions in refunds each year for burning diesel. And now our government wants to tax EV drivers? If that feels upside-down to you, you’re not alone. Let’s unpack what’s actually happening.

What the “diesel rebate” really is (and why it’s so big)

Australia’s Fuel Tax Credits (FTC) scheme is a massive rebate program for diesel that’s used off public roads (think mine sites and machinery) and for heavy vehicles on public roads (think trucks). These diesel users get a taxpayer-funded discount for every litre they burn.

The scheme is enormous. Treasury’s own statements and independent analysis put its annual cost at $10 billion a year, with mining companies pocketing the lion’s share. The Australia Institute estimates $9.6 billion in 2023–24, with over $1 billion apiece going to iron ore and coal every year. ATO data confirms mining is the largest beneficiary.

Is that a fossil-fuel subsidy? (By United Nations and OECD rules, yes.)

This is where definitions and seeing through the spin and greenwashing matters. Our government ties itself in knots pretending this isn’t a fossil fuel subsidy. But the OECD says it is. It counts not only cash handouts but also tax expenditures - like rebates and exemptions - as “fossil fuel support”. Obviously, the environment sees it that way too! The global climate doesn’t care what names our government uses, this scheme is clearly one that promotes the burning of fossil fuels.

The OECD has also called it for what it is, and urged Australia to reduce or eliminate fuel-tax exemptions for heavy vehicles and machinery. The International Energy Agency has also recognised Australia’s diesel rebates as a subsidy. In short: by international norms - and the G20 pledge Australia signed up to - our diesel rebates are squarely subsidies.

Meanwhile: Canberra is gearing up to tax EVs for road use

Back in October 2023 the High Court struck down Victoria’s state-based EV road-user charge as an unconstitutional “excise”, effectively reserving that power for the Commonwealth. That put the ball in Canberra’s court.

Fast-forward to August 2025: after the recent economic reform roundtable, Treasurer Jim Chalmers said there’s “a surprising degree of consensus” to introduce road-user charging, starting with EVs. State and territory treasurers are due to consider an options paper this month. It’s not legislated yet, but the policy direction is clear.

So if you’re thinking “hang on, so we’ll charge EVs first while still subsidising diesel for miners?”… yes. That’s the trajectory. The government says it’s about fairness - that everyone should “pay their share”. But what about mining companies paying their share for the impacts of climate collapse?!

To be fair, the government has made EVs cheaper: the Electric Car FBT exemption has been in place since July 2022. And New Vehicle Efficiency Standards are incentivising cleaner cars. But these policies will be undercut if EVs get a new tax. And most new vehicles on the road are still fossil-fuelled.

The bigger picture (and a better path)

Here’s the inconsistency: internationally we pledged in 2009 to phase out inefficient fossil-fuel subsidies. And our net-zero plans rely on rapid electrification. But instead of getting fossil fuel subsidies down, our government is pretending they don’t exist. And now, while it keeps subsidising diesel, it’s preparing to target EVs with an extra charge. That’s backwards.

There’s a more coherent way to do this:

1. Call diesel rebates what they are - a multi-billion dollar fossil-fuel subsidy scheme.

2. Set a timetable to wind back diesel rebates, especially in mining. Even industry voices like Andrew Forrest have suggested this to kick-start alternatives.

3. Design one neutral, national road-funding model. If Australia goes to road-user charging, it should apply to all vehicles as the fuel excise declines - so we’re not double-taxing petrol cars or singling out EVs.

4. Hold the line on EV incentives until parity. Keep the FBT exemption for battery-electric cars in the near term, align it with the efficiency standard, and set a clear review point tied to price parity and uptake - not an arbitrary date.

5. Put justice and place first. Use the savings to fund charging in regional, remote and First Nations communities. That’s how the transition can stay fair while cutting real tonnes.

Bottom line

Yes, Australia needs to fund roads. But taxing EVs first while rebating diesel at a massive scale is like charging people to bring reusable bags to Woolies or Coles while giving the plastic ones away for free. If we’re serious about a safe climate and a productive and prosperous Australia, we should urgently phase out fossil-era tax breaks and implement technology-neutral road funding. In that order.