Councils call for national climate compensation fund – and they want the polluters to pay

Local councils from around Australia are calling on the federal government to establish a national fund to help foot the bill for the soaring costs of climate adaptation and disaster management – and to finance it through a Climate Pollution Levy on the coal, oil and gas industry.

In a motion that will be put forward by the City of Sydney and backed by the Australian Local Government Association (ALGA) at a National General Assembly next week, councils will ask for a dedicated funding stream to match the scale of mounting climate costs.  

Renew Economy believes ALGA is seeking around $400 million a year in federal funding for local government climate adaptation and $900 million a year for disaster management capacity.

The motion, which will be put to a vote at the meeting in Canberra next week, calls for the creation of a National Climate Compensation Fund with a dedicated funding stream for local governments.

To help finance the fund, the councils want the federal government to identify taxes or levies on the coal, oil and gas industries that align with the damage their products and operations cause.

“A Climate Compensation Fund would provide a fair and practical solution,” says David Law, Councillor for Division 10 Sunshine Coast Council in Queensland.

“As a low-lying, coastal region with an extensive hinterland we face multiple hazards including inundation, coastal erosion, flooding and riverine flooding, land slip and bush fires. As these disasters become more frequent, the costs are becoming increasingly unsustainable.

“By requiring major coal and gas corporations to contribute to the costs of climate damage, it would give councils access to a dedicated funding stream for recovery and resilience, and reduce the need for ongoing rate increases,” Law said.

Toby Heydon, the Mayor of the Mount Alexander Shire in Central Victoria’s Goldfields region, says fires that affected local communities earlier this year have taken a “massive toll” on household finances and local government budgets.

“Mount Alexander Shire is just one of many councils calling for increased and more sustainable funding for communities to manage these crises,” Heydon said in a statement.

“It’s time for polluters to pay their fair share to clean up disasters they are responsible for, and to help ensure our communities are better prepared for the next one.”

The motion also calls on the federal government to establish a Parliamentary Inquiry into the adequacy of the 2025 National Adaptation Plan, developed by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) in response to the first National Climate Risk Assessment.

Jess Miller, the Deputy Lord Mayor of the City of Sydney says that while the Adaptation Plan creates a mandate for councils to deliver adaptation and emergency management services, it fails to provide the funds necessary to deliver these critical services.

“It is an unfunded mandate that is eating away at council budgets and bottom lines,” Miller said this week.

According to ALGA, Australia’s councils are responsible for maintaining a third of the nation’s community infrastructure, valued at nearly half a trillion dollars, including 75 per cent of the nation’s roads.

ALGA points to data from The Australia Institute that shows insured costs of climate-related disasters now are 12 times higher than they were 20 years ago, but local government revenue has grown only three times over the same period. 

Nationally, fires, floods and cyclones cost Australia $38 billion per year, equivalent to $3,800 per household, and this is predicted to rise to $73 billion by 2060. Between 2019 and 2023, more than 80 per cent of Australia’s local councils faced climate-related disasters.

“Councils, including the City of Sydney, are increasingly feeling the unsustainable financial burden created by responding to more frequent and more severe climate impacts,” Miller said.

“From storms, flooding and mould, to sinkholes in our roads, to heat stress affecting our residents and the costs of adapting our cities to make them safe. The costs are mounting and something has to change.”

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