Winding back the federal fuel tax credit scheme has attracted support from the independent body advising on climate change in the most populous state.
NSW Net Zero Commissioner Katerina Kimmorley says electrification of the state’s mining sector is a priority held back by exemptions on diesel tax.
Ms Kimmorley identified reforms to the fuel tax credit for the mining industry – agriculture excluded – as her top opportunity to underpin faster decarbonisation.
“We need to see our mining sector electrified,” she said at the Climate Innovation & Investment Summit in Sydney.
It would take more than repealing the fuel tax credit to drive mining sector decarbonisation, she said, but winding them back would improve the business case for electric trucks and other green alternatives.
NSW is not on track to meet its carbon neutrality goals, according to the state’s independent net zero commission.
All sectors are trailing behind, Ms Kimmorley said, including industry, energy and transport.
Federal fuel tax credits have come under renewed scrutiny as the Commonwealth pursues budget savings and faster emissions cuts in line with its climate targets.
Costing roughly $11 billion a year and no longer tied to the costs of maintaining roads, critics argue it is too big a fiscal burden and is keeping users hooked on a fuel that’s emissions-intensive and vulnerable to supply chain shocks, as exposed by the Middle East conflict.
Under a model put forward by Climate Energy Finance, diesel tax exemptions could be capped at $50 million but businesses could still claim rebates beyond the cap if they reinvested the funds into electrification.
The Australian Council of Trade Unions and the Labor Environmental Action Network have signalled support for a less-generous scheme, as has Andrew Forrest’s mining company Fortescue.
The iron ore miner is presently a beneficiary of the credits but has set itself a target to eliminate fossil fuels from its operations by 2030, a goal the company claims is on track.
Federal Resources Minister Madeleine King has said the government is not considering changes to the fuel credits in the 2026 budget and defended its use by farmers, miners and tourism operators not using public roads.
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