Australia’s fossil fuel subsidies to producers and major users totalled $14.9 billion in 2024-25, a 3 per cent increase from $14.5 billion in 2023-24. The forward estimates have reached a record $67 billion. To put that in perspective, that’s 14.2 times more money than Australia’s disaster response fund.

This comparison alone says something deeply wrong with Australia’s priorities, but the full picture is far more troubling when you examine where this money actually goes and what it does.

The largest single component of the subsidies is the Fuel Tax Credit Scheme, which costs the government over $10 billion annually. The scheme was supposedly designed to refund fuel taxes to businesses using diesel for off-road purposes, but in practice it has become a massive subsidy pipeline to multinational mining corporations.

The coal industry alone received $1.4 billion through this scheme in 2024-25, while in 2020-21 just ten of Australia’s largest mining companies claimed more than $1.7 billion. The mining industry as a whole claimed $3.4 billion that year, almost four times what the agricultural sector received. These aren’t struggling small businesses being supported through tough times. These are some of the most profitable corporations on the planet, extracting Australia’s resources and getting paid billions in public money to do it.

The irony here is that the Australian government simultaneously claims to be taking climate action. The safeguard mechanism, introduced to limit emissions from the country’s largest polluters, requires these same companies to reduce their emissions by 4.9 per cent annually until 2030. Yet, while imposing these reduction targets with one hand, the government is handing out billions in subsidies with the other — subsidies that directly undermine the supposed goal of reducing emissions.

The government is essentially telling major emitters they must cut pollution while paying them not to. This isn’t bureaucratic oversight. It is a fundamental choice to prioritise fossil fuel industry profits over climate action.

A climate strategy built on global carbon exports

The contradictions become even more obvious when you consider Australia’s role as the world’s third-largest fossil fuel exporter after Russia and the United States. Australia’s coal and gas exports were responsible for 1.15 billion tonnes of CO₂ emissions in 2023, with an additional 46 million tonnes coming from the extraction and processing of those fuels. When you combine domestic and exported emissions, Australia ranks as the planet’s sixth largest emitter of CO₂, responsible for over 1.5 billion tonnes per year. That’s more than Germany and the UK combined.

Between 2023 and 2035, Australia’s fossil fuel exports alone will consume around 7.5 per cent of the world’s remaining carbon budget required to limit warming to 1.5°C. This is a country that wants to be seen as climate-conscious on the international stage while actively sabotaging global efforts to avoid catastrophic warming.

The government’s own climate targets reflect this same disconnect from reality. Labor’s 2035 climate target of 62-70 per cent emissions reduction is consistent with well over 2 degrees of global warming, far beyond what climate science indicates is safe. More importantly, these targets only apply to a fraction of Australia’s actual carbon footprint. It’s an accounting trick that allows politicians to claim climate leadership while continuing to fuel the destruction of the planet.

The Great Barrier Reef is the perfect example of this hypocrisy. Climate change is recognized as the single biggest threat to the Reef, with four mass bleaching events in just seven years that wiped out half the shallow water coral

The Australian government pours hundreds of millions of dollars into reef research and conservation efforts, claiming to protect this natural wonder. Yet, since taking power in May 2022, the same government has approved three new coal mines or expansions, with four coal mines approved in 2023 alone. The government is funding research into why the Reef is dying while simultaneously approving the very projects that are killing it.

The real cost of these subsidies shows up in places like the Pacific Islands. These countries account for just 0.03 per cent of global pollution but are experiencing some of the most severe impacts of climate change. Category 4 and 5 cyclones have doubled in the West Pacific since the 1970s, driven by warming oceans driven by fossil-fuel emissions. Pacific islands are facing existential threats from rising seas, intensifying storms, and disrupted weather patterns, yet each Australian has produced eight times more carbon emissions per year than a Pacific Islander since 2015.

The current government campaigned on promises to restore Australia’s climate leadership and to listen and act on Pacific island warnings about climate change. Since taking office, they have approved seven new coal mines, announced a Future Gas Strategy that locks in gas extraction until 2050, and provided $11.1 billion in fossil fuel subsidies in 2024 alone.

The political dynamics that sustain these subsidies are well understood. The fossil fuel industry, particularly the mining sector, wields enormous political power in Australia. Both major political parties refuse to meaningfully reform fossil fuel subsidies because they fear the political consequences of crossing these industries.

The mining companies defend the Fuel Tax Credit Scheme with the misleading claim that fuel tax revenue specifically funds roads, so off-road equipment shouldn’t have to pay. This argument is simply false. Fuel tax revenue contributes to general government services, not exclusively to road funding, but the lie serves its purpose by framing a massive corporate subsidy as a reasonable exemption. Meanwhile, economists, climate scientists and international bodies including the G20 have repeatedly called for an end to fossil fuel subsidies, recognising them as a major barrier to climate action. The International Monetary Fund has estimated that if fossil fuel prices reflected their true environmental costs, global carbon dioxide emissions could be reduced by 36 per cent by 2025.

Lessons from countries that chose a different path

Australia is making an active choice to subsidise planetary destruction with public money. This isn’t a situation where the government has to pick between economic survival and environmental responsibility. The subsidies flowing to multinational mining corporations aren’t keeping small towns employed or funding essential services. They’re padding the profits of some of the world’s wealthiest companies while those same companies extract resources that, when burned, make the planet less habitable.

The government knows this. The science has been clear for decades. The impacts are already visible in bleached coral reefs, drowning Pacific islands, and intensifying extreme weather events. Yet the subsidies continue, increasing year after year, because the political system values fossil fuel industry profits more than it values a liveable future.

Compare this to what other countries have done when they’ve actually taken climate policy seriously. Costa Rica runs on over 98 per cent renewable electricity and has reversed deforestation while growing its economy. The country made a choice in the 1990s to end fossil fuel subsidies and invest in renewables and conservation instead. It worked. The economy grew, tourism boomed, and the country became a model for how environmental protection and economic development can align. Costa Rica isn’t wealthy. It doesn’t have massive oil reserves or coal deposits. It simply decided to stop subsidising environmental destruction and invest in alternatives instead.

Norway provides another useful comparison, though in a different direction. Norway is a major oil exporter, but it treats its oil wealth completely differently than Australia treats its coal and gas. Norway taxes oil extraction heavily, saves the revenue in a sovereign wealth fund, and uses that fund to benefit citizens while simultaneously investing heavily in domestic renewable energy. Norway isn’t pretending oil is clean or good for the climate. It’s extracting a finite resource, capturing the economic value for public benefit, and preparing for a post-oil economy. Australia does the opposite. It subsidises extraction, lets private companies keep most of the profits, and doubles down on fossil fuels instead of transitioning away.

Look at what’s happened to countries that ignored climate risk or continued doubling down on fossil fuel extraction without adaptation. Take Pakistan. In 2022, floods covered a third of the country, affecting thirty-three million people and causing over $30 billion in damage. Pakistan’s emissions are relatively low compared to wealthy nations, but the country had invested heavily in fossil fuel infrastructure and failed to prepare adequately for climate impacts.

Australia is heading toward a similar crisis, just from the opposite direction. Instead of being a victim of others’ emissions, Australia is creating emissions while experiencing increasing climate impacts at home.

The 2019-2020 bushfires burned 18 million hectares and killed an estimated three billion animals. The fires were unprecedented in scale and intensity, driven by record heat and drought. Insurance costs are skyrocketing in high-risk areas. Parts of northern Australia are approaching the limits of human heat tolerance during summer. The Great Barrier Reef has lost half its coral. This isn’t theoretical. They’re current costs that Australia is already paying while simultaneously subsidising the industries making these problems worse.

There’s also the matter of stranded assets. The global economy is moving away from fossil fuels, whether Australia wants to acknowledge it or not. The European Union has set legally binding targets. China is building renewable capacity faster than any country in history. The United States is investing hundreds of billions in clean energy through the Inflation Reduction Act. Major automakers are phasing out internal combustion engines. As the energy transition accelerates globally, the value of fossil fuel reserves will decline. Australia is betting its economic future on assets that are likely to become worthless while using public money to prop up that bet.

This is a deliberate choice. Australia could end these subsidies tomorrow. The money would still be there for disaster relief, for housing, for health care, for any number of public needs. Instead, it goes to corporations that don’t need it to dig up resources that are making the planet less habitable. It’s not like these subsidies are protecting jobs. These are profitable companies getting public money to do something that harms the public interest.

The government understands the climate science. The impacts are already visible in Australia and its region. Rising temperatures, coral bleaching, intensifying storms, longer fire seasons. All of it is documented, measured, and attributed to the greenhouse gas emissions that come primarily from burning fossil fuels. The connection between subsidies and outcomes is direct. Public money makes fossil fuel extraction more profitable, which increases extraction, which increases emissions, which drives climate change, which causes the damage we’re already seeing.

All of this is documented in public reports and budget papers. The environmental costs are measurable, the subsidy amounts are published, and the beneficiaries are known. The information is there for anyone who wants to look at it.

The contradictions aren’t failures of implementation. They’re the predictable result of a political system that has decided fossil fuel profits matter more than climate stability, more than the Great Barrier Reef, more than Pacific Islander lives, and more than the future habitability of the planet.