Paid to pollute | Environment Victoria

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Paid to pollute

Fossil fuel subsidies are one of the biggest barriers to fighting climate change. So we're leading a sustained national campaign to end fossil fuel subsidies in Australia.






What is a fossil fuel subsidy? 

A fossil fuel subsidy is any government action that lowers the cost of fossil fuel energy (coal, petroleum or gas) production or consumption or raises the price received by energy producers.

The government subsidies essentially make fossil fuels cheaper than they would otherwise be, leading to a greater use of fossil fuels than would occur with a level playing field. Fossil fuel subsidies therefore represent a significant barrier to action on climate change, both internationally and in Australia. According to Fatih Birol, Chief Economist at the International Energy Agency (IEA), eliminating these subsidies would provide half the carbon emissions savings required to keep climate change below 2 degrees. 

In its World Energy Outlook 2012, the IEA called for the phase out of fossil fuel subsidies globally concluding that “in 2011, fossil-fuel consumption subsidies worldwide are estimated to have totalled $523 billion, $111 billion higher than in 2010. By comparison, financial support to renewable energy amounted to $88 billion in 2011.”1  

An important next step for action on climate change is to stop paying companies to pollute. With debate around the future of the carbon price and the possible introduction of the Emissions Reduction Fund, the Federal Government has a great opportunity to plug a hole in the budget while simultaneously providing emissions reductions at zero cost to the government.

Highlighted below are four of the largest fossil fuel subsidies that should be targeted for removal in the 2014-15 Federal Budget. Cutting just these Big 4 subsidies would deliver budget savings of around $10 billion per year, while cutting other smaller federal subsidies could deliver a further $1 billion annually. Other fossil fuel subsidies also exist at the state level.

Big polluters like to argue that the measures we’re saying are subsidies are not actually subsidies. Unfortunately for them, the World Trade Organisation agrees with us.


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The Big 4: Australia’s most expensive, wasteful and polluting fossil fuel subsidies

1. Paying the fuel bill for big mining companies – around $2 billion a year

The average Australian pays 38 cents of tax per litre of fuel. But big mining companies operating in Australia pay just 6c a litre. Instead of paying their fair share, they get a massive tax refund costing the Australian taxpayer around $2 billion a year. 2

2. Subsiding cheaper fuel for airlines – $5 billion over four years


Australian taxpayers are funding cheap fuel for big airline companies like Qantas and Virgin. If these companies paid their own way it would literally save us billions3, and the airlines would have more incentive to be more fuel efficient, meaning less pollution.

3. Special tax treatment for big oil, coal and gas projects – more than $2 billion over the next four years


The coal, oil and gas sectors get special treatment under Australia’s tax system allowing them to depreciate their assets like drilling rigs and pipelines over a much shorter period than they are actually in use. Detailed analysis by the Australian Conservation Foundation found that this legal tax dodge for big oil, gas and coal projects is costing the rest of us billions, and it’s growing. 4

Thanks to the Paid to Pollute campaign, the Federal Government reduced this loophole at the budget in May 2013, saving Australian taxpayers $1.1 billion over the next four years, but there is still another $1 billion being lost to big polluters.


4. Handouts to Australia’s dirtiest power stations - $1 billion in 2013-14

The carbon price is an important reform that is starting the transition to a cleaner Australian economy.

However one part of the carbon price package represented a massive payday for polluters. Under the Energy Security Fund, Australia’s dirtiest power stations have been receiving around $1 billion in assistance annually.5 These payments should be scrapped to allow the carbon price to send a clear signal to companies to reduce their pollution.


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1. International Energy Agency, World Energy Outlook 2012, p.69

2. ANAO Audit Report No.49 2010-11, Fuel Tax Credits Scheme, p.73.
3. Commonwealth of Australia, Treasury, Tax Expenditures Statement 2013, January 2014, p.153.
4. Australian Conservation Foundation, September 2011. Drill now, Pay Later: The growing cost of tax breaks for the oil and gas industry in Australia.
5. Value of Free Carbon Units to be issued by the Clean Energy Regulator under the Coal-fired Generation Assistance Program.



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