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

I'm here to talk about the diesel fuel tax credit scheme, which I think the previous member didn't actually mention in her speech. The diesel fuel tax credit scheme is increasingly hard to justify in its current form. This is a policy that affects farmers, miners, transport operators and small businesses but not evenly. There are two main problems with it. Firstly, it discourages decarbonisation. Secondly, when fuel supply is tight, it disproportionately benefits mining companies over farmers.

Firstly, on the decarbonisation problem, Australia now has a safeguard mechanism to encourage large emitters to reduce pollution but a diesel fuel tax credit to effectively subsidise pollution, and the incentive to keep polluting is much greater than the incentive to reduce pollution. Under the safeguard mechanism, there's an effective carbon cost of $30 to $40 a tonne, but the diesel fuel tax credit amounts to an effective subsidy of about $190 per tonne of carbon pollution from diesel use. That is more than five times the decarbonisation incentive created by the safeguard mechanism. So, for the very large diesel users, we have a weak incentive to decarbonise and a strong incentive not to. In one year, the diesel rebated under this scheme produced more emissions than the combined emissions from all of Australia's planes, buses and trains. That is extraordinary. The rest of us are working hard to do the right thing, but at the same time we're making it cheaper for big polluters to keep polluting than to decarbonise.

Right now, we're seeing another good reason to decarbonise. The war in Iran is demonstrating how exposed we are to volatile and concentrated global fossil fuel markets with geopolitical instability. If we were further on our way to decarbonisation, we would not be so exposed. Continuing to effectively subsidise diesel for mining companies delays investment in electrification and in cleaner alternatives that would strengthen energy security over the long term.

The second problem with the current fuel tax credit structure is that the scheme in its current form favours mining companies over farmers, truckers and small businesses when fuel supply is tight, like it is now. A small farmer cannot secure bulk contracts or hedge price risk or stockpile fuel in the same way a major mining company can. When supply tightens, farmers become price takers. Their ability to get diesel at all can depend on what's left.

The concentration of this scheme is extraordinary. In the most recent year of available data, just 15 mining and freight companies received almost $3 billion in diesel fuel tax credits. Those companies burned close to six billion litres of diesel in one year, and these 15 companies made up 25 per cent of total fuel tax credit claims. This is in a scheme with over 170,000 businesses buying diesel and claiming tax credits. So, while Australians are doing it tough at the bowser and copping huge prices, BHP is being given $600 million in taxpayers' funds for its use of diesel. Billions of dollars are going to some of the world's biggest companies while Aussies are doing it tough. With diesel supply chains tightening, this policy is actively shaping who gets access to fuel and at what price. Right now, that policy favours the biggest players in the market, and it does so at a time when farmers, truckers and everyday Australians who genuinely depend on diesel and often have no alternatives are under pressure.

This motion is not suggesting that we remove fuel tax credit support for farmers or small businesses. Many have no viable alternatives to diesel today. They should not be asked to carry the burden of reform, especially at a time like this. The proposal put forward by the member for Bradfield is modest and targeted. It places a cap on how much diesel fuel tax credit a single company can receive. Above that cap—$50 million—credits are still available but only if they're reinvested in reducing diesel use through electrification or other decarbonisation measures. This change would incentivise mining companies to reduce their reliance on a volatile international diesel market.

Decarbonising mining operations would make our economy more resilient to shocks like the Iran conflict. On last year's figures, this reform would affect only about 15 companies. Farmers, small businesses and most regional operators would not be affected. It would make the scheme fairer in a fuel constrained market, reduce pressure on diesel supply chains and bring tax settings into closer alignment with stated climate goals. This is about ensuring that scarce public resources aren't reinforcing outcomes that work against farmers, against resilience and against long-term competitiveness. I commend the motion to the Chamber.

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