2026–27 Budget: It’s time to start phasing out fossil fuel subsidies
Climate Integrity has welcomed the opportunity to make a submission to the pre-budget consultation process for the 2026-27 Federal budget.
Submission summary
The time has come for the Federal government to take genuine steps towards the phase out of fossil fuel subsidies. Bringing an end to the system of Fuel Tax Credits in the 2026-27 federal budget is a perfect opportunity to put that into action.
At a federal level, Australia has taxed the consumption of fuels like petrol and diesel. While households and small businesses pay the Federal Fuel Excise each time they fill-up at the petrol pump, many of Australia’s largest mining companies don’t have to pay the Fuel Excise.
The system of Fuel Tax Credits sees companies in sectors like resources, construction and heavy transport refunded all of the fuel excise they pay - amounting to billions in refunded taxes. This removes a key financial incentive for these industries to invest in low or zero emissions transport alternatives, and has likely contributed to sustained increases in Australia’s transport emissions. It also amounts to an effective fossil fuel subsidy worth around $10 billion annually.
Climate Integrity recommends that the Australian Government phases out the Fuel Tax Credit Scheme, ending an effective fossil fuel subsidy that is provided primarily to emissions-intensive industries. Such a reform could unlock as much as $57 billion in additional revenues over the forward estimates, critical funding that could be deployed to support the accelerated decarbonisation of Australia’s transport sector, and economy more broadly.
Crucially, the retained fuel excise receipts could be used to support communities prepare and recover from the growing impacts of climate change, including the devastating damage caused by worsening floods, bushfires, drought and other extreme weather events.
