Conflicting Signals: How diesel rebates to big polluters are undermining the Safeguard Mechanism
The Australian government is spending several billion dollars a year undermining its own flagship policy for reducing industrial emissions – with the amount the biggest industrial emitters receive in rebates under the Fuel Tax Credit Scheme (FTC) far exceeding the price they pay for their emissions under the Safeguard Mechanism.
The Safeguard Mechanism is Australia’s primary policy for reducing greenhouse gas emissions from the country’s largest industrial facilities. Since 2023, it has set steadily declining annual emissions limits for large emitters and imposed a cost on emissions above those baselines, via the purchase of offset credits. The Fuel Tax Credit (FTC) Scheme is a rebate on the use of liquid fossil fuels that has existed in some form since the 1980s. It refunds the fuel excise currently 52.6 cents per litre – to businesses using liquid fuels, predominantly diesel, for machinery and off-road use.
Analysis by Naru Research, commissioned by Climate Integrity, looks at the top 18 recipients of the FTC in 2024-25, each of whom also operate facilities that fall under the Safeguard Mechanism. It shows that these companies, primarily large miners, collectively received a $3.3 billion rebate for the diesel they used over the past year. Diesel is the primary source of their on-site emissions. Yet under the Safeguard Mechanism, which imposes a cost on their emissions, they paid just $150 million.
This represents a ratio of 22 to 1 between the aggregate fossil fuel rebate received and the costs of compliance under the Safeguard Mechanism.
The three biggest recipients tell the same story:
Rio Tinto received $432 million in FTC rebates against $20.7 million in Safeguard Mechanism costs – a ratio of 21 to 1.
BHP received $622 million against $19.2 million – 32 to 1.
Glencore received $349 million against $8.6 million – 41 to 1.
Each circle is $1 million (2024–25)
Fuel Tax Credits received Net cost of compliance
Every circle is $1 million; circle size adjusts per company so each scale reads clearly. Source: Tim Baxter, Naru Research (2026).
Claire SnYder, Executive Director of Climate Integrity, says:
“These two policies are sending Australia's biggest polluters completely conflicting signals. The Safeguard Mechanism is supposed to signal that emissions are costly and must come down. In the same breath, the Fuel Tax Credit tells the same companies, at the same facilities, that the diesel behind those emissions is subsidised by the Commonwealth. You cannot expect a price signal to work when a much bigger subsidy is drowning it out.
Australia's biggest miners have the balance sheets and the technology to lead the transition off diesel. Government policy should be pushing them to make it, not paying them to avoid it. Right now fuel tax credits are a handbrake on decarbonisation that reward companies for sticking with diesel.”
Tim Baxter, from Naru Research, says:
“The Safeguard Mechanism, in its current form, is not driving down emissions at the pace that's needed. But it's the closest thing we have to a carbon price, and it's meant to be sending a signal that emissions are costly. To then have this interaction, where the very same facilities that are meant to be abating are being given money to keep burning diesel and are not incentivised to decarbonise, is completely incoherent.”
Key points
Combined, the top 18 recipients of Fuel Tax Credits in 2024/25 received $3.3 billion in diesel subsidy, but paid just $150 million in compliance costs under the Safeguard Mechanism. This represents a ratio of 22 to 1 between the aggregate fossil fuel subsidy received and the carbon price paid.
BHP received $622 million worth of Fuel Tax Credits in 2024–25, incentivising ongoing use of diesel at Australia’s largest user of the fossil fuel. In the same year, under the federal Safeguard Mechanism it was required to pay no more than $19.2 million to offset its greenhouse gas emissions. For every dollar paid as a carbon cost, it received $32 in fossil fuel subsidies.
Glencore received an estimated $349 million in Fuel Tax Credits in that year, and paid $8.6 million in carbon costs, a discrepancy of 41-to-1 between fossil fuel subsidies and the cost of compliance under the Safeguard Mechanism.
Rio Tinto received an estimated $432 million just against its Australian iron ore investments in 2024–25. In the same year, it spent $20.7 million to acquit its liabilities under the Safeguard Mechanism across its entire portfolio of Australian assets. This is a discrepancy of 21-to-1, though the total Fuel Tax Credits rebates are likely to be substantially higher.
In the future, this gap will narrow, as compliance costs increase with the ratcheting down of Safeguard Mechanism emissions limits. That said, FTC rebates will still vastly outstrip the cost of complying with the Safeguard Mechanism, ultimately muting the scheme’s already limited effectiveness. For every dollar paid by Australia’s major industrial facilities in meeting offsetting obligations under the Safeguard Mechanism in the remainder of this decade, at least $7 – though more plausibly $15 or more – will be handed back to subsidise fossil fuel use.
