A gas reservation scheme won’t raise a cent in revenue. Some Australians might benefit from lower gas prices, but multinational gas companies would continue to make huge profits selling Australian gas overseas, while the Australian public receives little benefit. Australia will continue to export gas so cheaply that Japanese companies can profit on-selling gas.
Tue 12 May 2026 01.00 AEST
Photo: AAP Image/Bianca De Marchi
For decades, Australia has rolled out the red carpet to a rapidly growing gas industry that pays little tax and royalties, employs few people, pushes up gas and electricity prices for Australian families and businesses, and worsens the climate crisis.
So far, the Albanese Government has resisted widespread calls to fix this problem through a highly popular proposal for a 25% gas export tax. However, the Government has recently returned to discussing its announced domestic gas reservation scheme, the details of which remain undecided.
But what is a domestic gas reservation scheme? And does it mean we don’t need a gas export tax?
A domestic gas reservation scheme is a policy designed to ensure a certain amount of gas extracted in Australia is reserved for Australian uses (such as generating electricity, heating homes and businesses and manufacturing) rather than being exported.
So, for instance, gas companies could have to reserve at least a fifth (20%) of the gas they produce for the domestic market and can only export the remaining four-fifths (80%) or less.
Theoretically, a well-designed domestic gas reservation would reduce prices for Australian households and businesses. Since gas exports began from Australia’s east coast in 2015, the east-coast wholesale price of gas paid by Australians has tripled. This enormous increase in the cost of gas for industry, electricity generation and households was not due to a tripling in the cost of producing gas, but by the fact that gas companies had the choice to sell to Australians at the old prices or at higher prices they could receive on the world market.
An effective gas reservation policy would reserve a certain amount of gas for Australians, who would no longer have to compete with exports to buy this gas. However, the effectiveness of a gas reservation in lowering prices depends on its design. A poorly designed scheme can be manipulated by gas exporters, for instance, and they might maximise their profits by directing cheaper-to-produce gas to exports while selling more expensive gas to Australians.
Alternatively, gas reservation schemes can be an excuse for expanding fossil fuel production if they only applied the reservation to new (not existing) gas projects. Notably, Western Australia (WA) already has a reservation policy for LNG exporters to supply 15% of reserves domestically, but it does not specify when this gas needs to be supplied, meaning exporters simply export when international prices are high. This meant that in 2023, only 8% of WA gas production was supplied domestically, about half of the supposed reserve, generating an artificial WA “gas shortage”.
As the name would suggest, a gas export tax is a tax on the value of gas exported from Australia. This means that any gas shipped overseas for sale to foreign customers would attract the tax.
Yes, a gas tax would also push down Australian gas prices. Gas companies like to avoid tax, and a gas export tax is easy to avoid by not exporting so much gas.
A 25% gas export tax could see Australian wholesale gas prices fall by up to 25% as gas exporters compete with each other to avoid paying the export tax by diverting supply to the Australian market that doesn’t have the tax.
Importantly, a gas export tax is both simple and difficult to avoid, making manipulation and evasion much less likely than with potential gas reservation policies.
While you can have both a gas reservation and a gas export tax, the biggest difference is the amount of revenue they would raise.
A gas reservation scheme won’t raise a cent in revenue. Some Australians might benefit from lower gas prices, but multinational gas companies would continue to make huge profits selling Australian gas overseas, while the Australian public receives little benefit. Australia will continue to export gas so cheaply that Japanese companies can profit on-selling gas.
Conversely, a 25% gas export tax could raise up to $17 billion per year, and it would bring down the cost of gas for Australian families and businesses.
If the Albanese Government had implemented this tax shortly after its election in May 2022, it would have already raised $63.8 billion. This is enough for the Albanese government to have deposited $2,500 into the bank accounts of each and every Australian, including children.
This tax could fund free university and TAFE education, free universal early childhood education and childcare, or bring dental into Medicare.
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