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Graph of the Day: Fossil fuel subsidies to coal miners costing billions

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Last December, the Australian Conservation Foundation reminded us just how much Australians pay for fossil fuel subsidies, with a report estimating a total of $47 billion would be allocated by the federal government to the production and use of fossil fuels over the following four years.

As the report also pointed out, the biggest single drag on taxpayer funds was the Fuel Tax Credit scheme, which would be responsible for $27.9 billion over four years. But a new report, released on Wednesday by the ACF, has found that basic reform to that scheme could save as much as $15 billion over the four year period.

According to the report – and illustrated in chart below – the cost of subsidising the diesel fuel used by just five of the nation’s biggest coal companies – Glencore Xstrata, BHP Billiton, Peabody, Rio Tinto and Anglo American – is around $360 million a year.  Over the next 4 years the Government will spend more on the Fuel Tax Credit Scheme than on overseas aid

Screen Shot 2015-04-29 at 12.06.24 PM

The ACF says that the way the scheme is designed means most coal mining companies that use imported fossil fuels for their operations are eligible to receive a tax credit that essentially refunds them the entire amount of tax paid on the fuel.Screen Shot 2015-04-29 at 12.10.36 PM

“Australia’s largest coal mining companies are having their fuel subsidised by the taxpayer while they mine a highly polluting substance that is damaging the climate,” said ACF CEO Kelly O’Shanassy.

“If the government wants to create a fairer budget this year, it should reform this subsidy which encourages pollution and adds to the profits of already profitable private companies.

“ACF proposes a $20,000 cap per claimant, so those making small claims, like farmers, would not be adversely affected.

“Legal advice provided to ACF by Environmental Justice Australia shows legislative reform of the Fuel Tax Credits Scheme would be relatively straightforward.

“Changing the scheme would save the budget $15 billion over the forward estimates.

The report proposes that the $20,000 subsidy cap be introduced gradually, over a period of time; starting with a limit of $80,000 in FY 2015-2016, and moving to $60,000 in 2016-2017, $40,000 in 2017-2018 and $20,000 in each financial year from 2018-2019 onwards.

“Australian taxpayers’ hard-earned dollars should be used to build a better life for all of us, not to add to the bottom lines of multinational coal companies,” O’Shanassy said.  

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  • phred01

    psst Joe Hockey here’s billions of saving here oops forgot dirty coal & miners pay into lib coffers they need a social security safety net. Suppose the only thing left is to target pensioners, students, & other social security benefits recipients . Gina” Rinehart got her ATM back

  • Peter B

    Sophie/Giles, The older generation will remember that “Fuel Excise” was an impost for road usage. The “Rebate” is not a “subsidy” but a return when the fuel is not used on the nations roads. Examples are for farm tractors, harvesters, mine equipment or generators etc. The delivery truck carrying such fuel would pay the Excise but the contents to be used “off road” are not liable at law for the Excise. The collection mechanism used by the ATO was/is that it is paid at source but reclaimed when and if it is “used” off road.
    If you desire to change the purpose of “Fuel Excise” i.e. to be declared as just another General Revenue impost and not (purportedly) for roads then say so! By promoting it as a “subsidy” may be good in emotional arguments for most of your readers but tends to fall very flat when applied in the bureaucratic, legal and tax arenas.
    The politics of the farm lobby and “increasing the cost of food” by removing the Rebate for farmers is formidable. What is your plan?

    • Farmer Dave

      Peter B, I understand that the payment of the tax credit up to the cap is intended to ensure that the change proposed will not impact on farmers, and therefore will not impact on the cost of food. While your understanding of the origins of the credit may be correct, some taxpayers (and I’m one of them) regard such tax expenditure as being tantamount to a subsidy. In this case, since it is imperative that we wean ourselves off fossil fuels as soon as possible, the removal of the subsidy is good policy – as well as helping with the “budget emergency” that Joe Hockey used to go about.

    • wideEyedPupil

      By that logic I shouldn’t have to pay rates if I don’t put my garbage bins out (I was down to 1 bin every 2 months in Darebin who continually hike the rates every year).

      Fuel Excise goes into general revenue and is considered a subsidy by the OECD bodies that adjudicate on subsidies and compares them nation to nation. You can remove the excise exemption for miners and leave it for farmers (as it adds to food costs although more so conventional than organics) as is Greens policy.

  • Jim Simpson

    Well said Peter B – Come on Sophie/.Giles – Indeed, “What is your plan?”

    • onesecond

      Why do people struggle with comprehensive reading? It is in the article, a cap at 20000 $ to not affect farmers.

      • Jim Simpson

        Farmers are by no means the only off road/grid business reliant upon diesel. As a senior Treasury official told a Senate hearing in June 2014, “the principal rationale behind the fuel tax credit system … was to ensure that a number of industries that used fuel off road were not subject to double tax.”

        It makes little sense to impose an effective road user charge in the form of fuel excise on fishing trawlers, harvesting equipment or diesel generators powering remote mining & community facilities such as hospitals, schools & tourist accommodation located off the electricity grid. To do so would represent a large and unfair super tax on regional & remote Australia.

        • onesecond

          Firstly, people spewing diesel fumes into the atmosphere should pay for its carbon capacity regardless of where they are to disincentivise fossil fuel use and to promote fuel efficiency. Secondly, why do you bring in hospitals, schools, tourist accomodations and again harvesting equipment? How would they get over that cap? Thirdly, if you can’t bring in fish to a competitive price with the fuel excise, you can’t do that without it too, as the other trawlers would have to pay the same excise. If that makes imported fish cheaper, tax that too and you get even more money to give the middle class a tax cut or whatever. Why waste money to incentivise energy waste when you can put it to much better use.

          • Jim Simpson

            1. Implies ‘carbon’ in our atmosphere is a problem – really, based upon what empirical evidence? If/when there’s a more efficient, economic & no less reliable means to power industry, other than via fossil fuels (for which industry already pays to meet stringent environmental pollution control standards relative to exhaust emissions), I doubt industry will readily switch to alternate energy sources.
            2 & 3. Since neither hospitals, schools, tourist accommodations, nor fishing trawlers don’t drive on roads for the conduct of their primary business/role in society, I would think that rationale (as to why they might just qualify for the off road/grid fuel tax credit) was rather obvious.

          • charybds

            Perhaps a course in basic chemistry and a quick web search or two for the empirical evidence you deny would settle your first point. But I doubt there’s anything much that will alter your stultified 1980s economic ideas.

          • Jim Simpson

            I took your advice & not only found some empirical evidence that I don’t deny, but no less importantly, some quite relevant predictions & statements against which to compare them with as follows http://www.galileomovement.com.au/docs/jr/FailureOfClimateModels.pdf – So – who’s the denier now?

          • onesecond

            You act like a denier, cause you don’t understand the underlying physics and confuse them with an overblown very short term trend, that has already ended. Look at the bigger picture:

            http://www1.ncdc.noaa.gov/pub/data/cmb/images/indicators/global-temp-and-co2-1880-2009.gif

          • AshMat

            son you got owned so many times down below that you should probably quit your paid trolling job (Exxon? or some other funder?) and look for real work.

          • Jim Simpson

            Rubbish – You couldn’t be further from the truth.

          • onesecond

            1. Ok, you obviously have no idea, so I will explain it to you. The absorption of light in the infrared spectrum by the CO2 molecule can be very easily measured in the laboratory, there is no doubt about that. The earth reemits the energy received by the sun in the infrared spectrum, again a very simple measurement as is the following. Mankind has added an additional layer of 1cm around the whole world through burning of fossil fuels since the industrialisation. This additional blanket obviously changes the heat balance in such a way, that simple physics tells us that the earth should heat up. By simply measuring the temperature, we can tell it does. Again simple physics tells us, that it will get a lot worse if we add more CO2. On a sidenote, simple chemistry tells us that dissolving more CO2 in the oceans leads to their acidification which poses a great risk to the survival of certain species and increases the probability of the whole marine ecosystem collapsing. As we only have one planet, we shouldn’t ignore what basic physic and chemistry tells us and everyone should play their part to preserve it.
            2. Everyone includes hospitals etc. but as nobody wants to threaten their ongoing operation the cap was proposed, so a slower transformation can be managed by clean technologies as the emerging electric vehicles. The solutions are already there, just don’t stand in the way of smarter people saving your butt because you are to lazy to deal with some changes.

          • Pedro

            97% of publishing climate scientists agree that raised atmospheric CO2 levels is the cause of global warming and that humans have raised the CO2 levels. There is absolutely no other scientifically credible explanation. There is no debate about the causes of global warming from climate scientists. The only debate is among political ideologies and the vested interests that control them.

  • onesecond

    I think if I read any more news about Australian “policy” my head will explode! But thanks for calling them out Reneweconomy!