Australia’s biggest industrial emitters are being paid to pollute, new analysis finds

New analysis has found Australia’s biggest industrial emitters received around $22 in Fuel Tax Credit rebates for every dollar they spent complying with the federal government’s emissions reduction policy last year.

The Fuel Tax Credit (FTC) scheme allows eligible businesses to claim back fuel excise paid on diesel used in machinery, heavy vehicles and other off-road operations.

The analysis by Naru Research found the top 18 FTC scheme recipients, mostly multinational iron ore mining and coal companies, collectively received $3.3 billion in credits but only faced an estimated $150 million in compliance costs under the Safeguard Mechanism.

“Australia’s biggest industrial greenhouse gas emitters are being paid to pollute,” stated researcher Tim Baxter.

The Safeguard Mechanism is the federal government’s main policy for reducing greenhouse gas emissions from the country’s largest industrial facilities.

It requires major emitters to stay within progressively declining emissions limits or meet compliance obligations if they exceed them.

“The federal government is spending several billion dollars a year undermining its own legislated carbon reduction framework – ensuring that its most polluting industrial facilities have no financial incentive to stop polluting,” Mr Baxter said in the report.

The three biggest recipients of the FTC rebates in 2024-25 were Rio Tinto, BHP and Glencore.

Rio Tinto received $432 million in FTC rebates against $20.7 million in Safeguard Mechanism costs – a ratio of 21 to 1.

BHP received $622 million against $19.2 million, which is a ratio of 32 to 1.

Glencore received $349 million against $8.6 million, a ratio of 41 to 1.

“These two policies are sending Australia’s biggest polluters completely conflicting signals,” said Claire Snyder, executive director of Climate Integrity, the climate policy organisation that commissioned the analysis.

“The Safeguard Mechanism is supposed to signal that emissions are costly and must come down.

“In the same breath, the Fuel Tax Credit tells the same companies, at the same facilities, that the diesel behind those emissions is subsidised by the Commonwealth.

“You cannot expect a price signal to work when a much bigger subsidy is drowning it out.”

Mr Baxter said the two policies were working in direct opposition “with one wiping out the other.”

“The Safeguard Mechanism, in its current form, is not driving down emissions at the pace that’s needed,” he argued.

“But it’s the closest thing we have to a carbon price, and it’s meant to be sending a signal that emissions are costly.

“To then have this interaction, where the very same facilities that are meant to be abating are being given money to keep burning diesel and are not incentivised to decarbonise, is completely incoherent.”

The Albanese government’s reformed Safeguard Mechanism came into effect on 1 July 2023.

A review is due to begin later this year and will consider a range of settings, including whether the scheme is encouraging companies to cut emissions at their operations rather than rely on other ways to meet their obligations, such as buying carbon credits.

Australia Institute analysis found fossil fuel subsidies cost Australian governments $16.3 billion in 2025–26, an increase of 9.4 per cent on the previous year.

The FTC scheme is the biggest and has increased steadily – more than doubling from under $5 billion in 2008–09 to $10.8 billion in 2025–26.

“That’s more than is spent on the Australian Army,” said Rod Campbell, research director at the Australia Institute.

“Subsidising coal miners and gas companies is the worst possible thing a government can do on climate change, with the possible exception of giving away gas and coal for free, which Australian governments also do all the time.”

Australia Institute research shows the FTC scheme is expected to jump to $13.1 billion in 2028-29 – a total increase of 21.3 per cent over three years.

The growth in Fuel Tax Credit spending has outpaced many other sectors of government expenditure.

In comparison, the National Disability Insurance Scheme (NDIS) was forecast to increase by 21.7 per cent over the same period, prompting “massive, brutal cuts” in the May budget, with Health and NDIS Minister Mark Butler telling the National Press Club in April that “these cost blowouts simply cannot continue”.

“You’ve heard all these lines because politicians and business executives say them all the time,” said Mr Campbell.

“But, have you heard about the exploding costs of tax breaks for BHP and Gina Rinehart? How about billions in handouts for gas companies?”

“It’s time to call BS on the idea that we can’t afford to look after each other, while governments simultaneously hand out billions to foreign-owned mining companies.”