Kate Chaney (Curtin, Independent) Share this | Hansard source

There is much in the motion moved by the member for Griffith that I support. I commend the government on its commitment to a 2035 emissions reduction target, and I hope that the government will legislate that target soon to provide some policy certainty. But much more needs to be done beyond setting targets. There's a worrying contradiction in the government speaking about climate action successes while simultaneously forgoing billions of dollars in tax revenue from bigger emitters to effectively make fossil fuels cheaper.

Today I'm calling for reform to the diesel fuel tax credit scheme. The diesel fuel tax credit scheme allows large mining companies to claim a rebate for their use of diesel in mining vehicles and equipment. This scheme incentivises major mining companies to keep burning fossil fuels instead of decarbonising. In FY 2024, $2.9 billion in diesel fuel tax credits was paid to 15 mining and freight companies, and the diesel that was rebated produced more than 16 million tonnes of CO2. That's huge. More emissions come from this diesel that we're effectively subsidising than from all our planes, buses and trains combined. We're trying to drive the energy transition with our foot on both the accelerator and the brake.

There's an increasing chorus of voices calling for a fix to this contradiction. Recently, the head of the Climate Change Authority, Matt Kean, joined this chorus. The safeguard mechanism, which is designed to push heavy industry to reduce its emissions, effectively charges companies $35 per tonne of CO2 when they emit too much, but the diesel fuel tax credits provide a subsidy of approximately $190 for every tonne of CO2. So, if you are a large mining company, the subsidy that you get when you stick with diesel is five times the size of the penalty that you pay for emitting too much. Why would you decarbonise? This crazy policy means companies are having to choose between the right thing for the country and better returns for shareholders. We need to line those incentives up so companies can make the best decisions for shareholders and the country.

As a Western Australian, I know the importance of the mining industry and I know mining companies are not a bottomless pit of money. Government should be supporting them through the energy transition so they can continue to drive Australian prosperity as the world changes, but propping up fossil fuel use is not the best way to do this. Weaning them off diesel subsidies and incentivising them to decarbonise is the best way to meet the expectations of the millions of Australians who are committed to climate action and ensure a smoother transition for the mining industry. That's why I support the clean energy finance reform proposal, which is to introduce a $50 million cap on the diesel fuel tax credit paid. Above that cap, any credits would be retained by the company, but only if they are reinvested in decarbonisation. In other words, we can convert a fossil fuel subsidy into a clean tech investment incentive. On last year's numbers, this affects only 15 companies. No farmers or small businesses would be impacted. The credits given to big mining companies would be invested in futureproofing these companies by breaking their reliance on fossil fuels.

Some will say we should get rid of this effective subsidy altogether, but, for now, this model presents a sensible step that creates the right incentives without driving up the cost of food or transport. Some will say that fuel tax shouldn't be paid on diesel used off road because the tax pays for the roads, but that hasn't been the case for decades. The hypothecation of fuel taxes for road funding was abolished in 1959, and, since 1992, there's been no formal link between fuel excise and road funding. Today the fuel excise is simply a revenue measure, and spending on roads is a completely separate expenditure. We will need to rethink whether we ask users to pay for roads as transport goes electric, but that work could be done in parallel.

Some will say that the tech to replace diesel isn't ready. Yes, some tech is at an early stage, but investment from our mining majors will bring these technologies down the cost curve. Importantly, this simply isn't a good reason to keep a policy that means taxpayers forgo $3 billion a year to help our large mining companies keep burning fossil fuels. If we want to hit our 2035 and 2050 targets, if we want a strong, sustainable mining sector in WA and around Australia and if we want taxpayers' money working for the future rather than the past, we must align our fiscal settings with our climate ambitions. Let's convert this support for fossil fuels into a clean tech investment incentive so every dollar invested pushes us forward.

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