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Key points

• By far, Australia’s largest contribution to the climate crisis continues to be the production of fossil fuels for use overseas. In the 2026 financial year, Australia was the world’s largest exporter of metallurgical coal, and its second largest exporter of both thermal coal and liquefied gas (aka LNG). The climate crisis is driven first and foremost by the production and use of coal, oil and gas. Australia shares responsibility for the harm caused no matter where these are burned.
• Some progress in our emissions at home, but not enough. While the pace remains insufficient to meet either the country’s 2030 or 2035 climate targets, Australia has reported some small progress in reducing its net emissions at home. While increased penetration of renewable energy in the country’s electricity sector has played a minor role in recent years, the main cause of this reported reduction in net emissions is reduced clearing of remnant native forests
• In the past 20 years, climate pollution from the country’s exported fossil fuels – particularly coal and gas – has grown unchecked. That growth has vastly outpaced any change in emissions at home. Between the 2005 and 2020 financial years, emissions from Australia’s exported fossil fuels essentially doubled. While China’s temporary ban on Australian coal imports between 2020 and 2023 moderated that growth for a time. In recent years the country’s exported climate pollution has begun growing again.
• There are no planned reductions in sight for Australia’s fossil fuel exports. Official forecasts from the federal industry department predicting coal and gas production to continue at near today’s level until at least 2030.
• There is little prospect of global temperature increases staying within the boundaries set out by the Paris Agreement unless both supply and demand for coal, oil and gas are addressed in national policies.¹ Despite the critical need for the country to reduce both coal² and gas³ exports in a Paris-aligned world, Australia has no suitable policies to bring this about. It should also be noted that due to the impact fossil fuel production has on emissions at home, Treasury modelling for Australia’s 2035 climate target assumes drastic falls in the country’s total production of the fossil fuels.⁴ There is little prospect of the country reaching those goals without it.

Endnotes

1. Stockholm Environment Institute, IISD, & Climate Analytics. The Production Gap. https://productiongap.org/ (2025). 

2. Climate Resource. Australia’s Coal Outlook in a Warming World: Insights from Integrated Assessment Models. https://www.climate-resource.com/publications/australia-s-coal-outlook-in-a-warming-world (2025). 

3. Climate Resource. The Last LNG Train Home: Australia’s LNG Outlook in a Demand-Constrained World. https://www.climate-resource.com/news/the-last-lng-train-home (2026). 

4. The Commonwealth Treasury. Australia’s Net Zero Transformation: Treasury Modelling and Analysis. https://treasury.gov.au/publication/p2025-700922 (2025). 

I provided a detailed technical review of the Climate Council’s recent report, with a view to improving both its technical accuracy and its strategic value. The quality of the final product is – of course! – still primarily the result of efforts by the many good folks at the Climate Council.

You can read the full report on their website by clicking below.

The Australian government is spending several billion dollars a year undermining its own flagship policy for reducing industrial emissions – with the amount the biggest industrial emitters receive in rebates under the Fuel Tax Credit Scheme (FTC) far exceeding the price they pay for their emissions under the Safeguard Mechanism. 

The Safeguard Mechanism is Australia’s primary policy for reducing greenhouse gas emissions from the country’s largest industrial facilities. Since 2023, it has set steadily declining annual emissions limits for large emitters and imposed a cost on emissions above those baselines, via the purchase of offset credits. The Fuel Tax Credit (FTC) Scheme is a rebate on the use of liquid fossil fuels that has existed in some form since the 1980s. It refunds the fuel excise currently 52.6 cents per litre – to businesses using liquid fuels, predominantly diesel, for machinery and off-road use.

Analysis by Naru Research, commissioned by Climate Integrity, looks at the top 18 recipients of the FTC in 2024-25, each of whom also operate facilities that fall under the Safeguard Mechanism. It shows that these companies, primarily large miners, collectively received a $3.3 billion rebate for the diesel they used over the past year. Diesel is the primary source of their on-site emissions. Yet under the Safeguard Mechanism, which imposes a cost on their emissions, they paid just $150 million.

This represents a ratio of 22 to 1 between the aggregate fossil fuel rebate received and the costs of compliance under the Safeguard Mechanism.

The three biggest recipients tell the same story:

• 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 – 32 to 1. 
• Glencore received $349 million against $8.6 million – 41 to 1.

Claire Snyder, Executive Director of Climate Integrity, says:

“These two policies are sending Australia’s biggest polluters completely conflicting signals. 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.

Australia’s biggest miners have the balance sheets and the technology to lead the transition off diesel. Government policy should be pushing them to make it, not paying them to avoid it. Right now fuel tax credits are a handbrake on decarbonisation that reward companies for sticking with diesel.”

Tim Baxter, from Naru Research, says:

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

Key points

• Combined, the top 18 recipients of Fuel Tax Credits in 2024/25 received $3.3 billion in diesel subsidy, but paid just $150 million in compliance costs under the Safeguard Mechanism. This represents a ratio of 22 to 1 between the aggregate fossil fuel subsidy received and the carbon price paid.
• BHP received $622 million worth of Fuel Tax Credits in 2024–25, incentivising ongoing use of diesel at Australia’s largest user of the fossil fuel. In the same year, under the federal Safeguard Mechanism it was required to pay no more than $19.2 million to offset its greenhouse gas emissions. For every dollar paid as a carbon cost, it received $32 in fossil fuel subsidies.
• Glencore received an estimated $349 million in Fuel Tax Credits in that year, and paid $8.6 million in carbon costs, a discrepancy of 41-to-1 between fossil fuel subsidies and the cost of compliance under the Safeguard Mechanism.
• Rio Tinto received an estimated $432 million just against its Australian iron ore investments in 2024–25. In the same year, it spent $20.7 million to acquit its liabilities under the Safeguard Mechanism across its entire portfolio of Australian assets. This is a discrepancy of 21-to-1, though the total Fuel Tax Credits rebates are likely to be substantially higher.
• In the future, this gap will narrow, as compliance costs increase with the ratcheting down of Safeguard Mechanism emissions limits. That said, FTC rebates will still vastly outstrip the cost of complying with the Safeguard Mechanism, ultimately muting the scheme’s already limited effectiveness. For every dollar paid by Australia’s major industrial facilities in meeting offsetting obligations under the Safeguard Mechanism in the remainder of this decade, at least $7 – though more plausibly $15 or more – will be handed back to subsidise fossil fuel use.

You can read the full briefing note on Climate Integrity’s website and mirrored below here:

Note: Naru Research supported Comms Declare during the final stages of developing this remarkable report detailing the fossil fuel industry’s attempts to influence children from the very earliest stages of their life.

The report seeks to establish a parliamentary enquiry into the influence fossil fuel companies are having on our children, and the institutions Australian parents trust. I edited this report and worked with the Comms Declare team to drive the greatest impact from its publication.

You can read the full report here: