Calls to phase out fossil fuel subsidies after speculation about net-zero emissions target

Key points:

  • The Australia Institute says fossil fuel subsidies cost more than Army capabilities in the budget
  • There are big disagreements over the figures and what is a “subsidy” and what is not
  • Queensland Senator Matt Canavan says a net-zero emissions target makes no sense amid China tensions

Fossil fuel subsidies have cost state, territory and federal budgets roughly $10.3 billion over the past financial year, or $19,686 a minute, according to a new report from The Australia Institute.

The progressive think tank says the $7.84 billion allocated for the fuel tax credit scheme in the Federal Budget alone exceeds the $7.82 billion spent on Army capabilities or the $7.55 billion on Air Force capabilities.

It also has calculated state governments have contributed some $1.2 billion to coal, oil and gas companies by helping reduce the costs of exploration, improving ports, railways and power stations, while also funding research aimed at reducing emissions caused by burning fossil fuels.

In the past, mining industry lobby groups and pro-mining politicians have rejected The Australia Institute’s figures, saying the assumptions underpinning them are “flawed” and do not take into account the industry’s broader contribution to the economy.

“We really now need to be talking about phasing these incentives out, particularly given the US under Joe Biden is looking at removing tax perks,” Australia Institute research director Rod Campbell said.

“It’s not just important for Australia to take action on climate change but some of this money could be going to schools, or hospitals or issues voters are really worried about.”

The report also states:

  • The Northern Territory is the biggest backer of the gas industry over the longer term with almost $4 billion committed to an offshore gas project and $1 billion for pipelines.
  • Queensland provided industry assistance measures worth at least $744 million last year.
  • Western Australia is spending hundreds of millions on power stations.
  • New South Wales is allocating $100 million towards “coal innovation”.
  • The ACT is the only jurisdiction with no fossil fuels subsidies, though it notes Tasmania’s budget also has no clear industry assistance.

The true cost of fossil fuel subsidies is hard to calculate

The total cost of fossil fuel subsidies has been a contentious issue over the past decade.

At the centre of the debate is what should count as a subsidy and what should not.

An International Monetary Fund report in 2019 said Australia was spending some US$29 billion ($37.4 billion) in subsidies, though that paper included the estimated cost of things like the environmental and social price of pollution and greenhouse gas emissions.

Other organisations, like the Productivity Commission as well as think tanks have estimated the annual cost actually ranges from several hundred million a year to as much as $12 billion annually.

“The real question is, what’s the most appropriate number?” Mr Campbell said.

“We haven’t included damage to the environment or to human health (in our report), because estimating those numbers is difficult and estimating those numbers is controversial.

“What we’ve done to try and eliminate any controversy, is we’ve just added up what is in the books, state and federal budgets, and reports from government-owned corporations.”

Canavan says net-zero target makes no sense amid China tensions

Former resources minister and outspoken Queensland backbencher Matt Canavan said many of the assumptions in The Australia Institute’s report are flawed.

He said some assistance to fossil fuel industries can be good for the country and economy, and asserts that mining is the least subsidised industry.

“Fossil fuels are our nation’s biggest export. I think government should be helping encourage that,” Senator Canavan, a big supporter of new coal projects, said.

“If a government builds a rail line or a port to support mining, companies have to pay to use it … but it also then is permanent infrastructure that allows other industries to benefit and piggyback on.”

“This has an impact far beyond their own sector.”

He doesn’t believe infrastructure spending or the federal fuel tax credit scheme should be seen as fossil fuel subsidies.

“I fundamentally disagree with the assumptions. The absence of a tax is not a subsidy and the mining industry builds its own roads, they don’t use public ones,” Senator Canavan said, even though he conceded the fuel excise tax is not directly linked to spending on roads.

“This scheme is also available to other industries, like agriculture.”

Over the past week, there has again been speculation Prime Minister Scott Morrison will commit Australia to a target of net-zero emissions by 2050 at some point this year.

It is a target that would be a lot less ambitious than the UK, the US and Canada, which are all vowing substantial emissions reductions by 2030 or 2035.

But Senator Canavan, who has been a vocal opponent of a 2050 goal, claims regional security concerns in coming decades should make Australia think twice before committing to anything.

“I agree completely with Defence Minister Peter Dutton; we can’t discount the possibility of war with China. While that is a distinct possibility why would we be hamstringing our own industries?” he said.

“Cutting our carbon emissions while China increases output is not going to change the environment, it’s just going make that country stronger and more able to bully us and other peace-loving countries in the region.”

Instead of set targets, over the past week the Morrison government has pledged more than $1.1 billion dollars towards what it calls “clean” and “low emissions” technologies and projects.

Some of the money will go to carbon, capture and storage research – a technology many climate scientists say is an expensive failure aimed at extending the life of fossil fuel power generation projects.

Another chunk of the funding will go towards boosting hydrogen production, some of which will be manufactured using gas.

Extracted from ABC

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