The debate centres on the long‑running fuel tax credit scheme, which refunds a large share of fuel excise to big industrial users such as miners and heavy transport operators. The current government came to power promising stronger climate action and budget repair and it now faces a choice between holding the line on a costly concession or reshaping it in a way that pushes cleaner technology without shocking a sector that underpins export income and regional employment.
Mining companies argue that large diesel truck fleets and processing equipment cannot be electrified at scale in the near term because the technology is still emerging and the required grid upgrades, charging networks and plant changes are complex and expensive. Industry plans focus on electrifying haul trucks, installing high pressure electric boilers and trialling hydrogen based processes for high temperature heat but internal timelines put widespread deployment into the early 2030s. At the same time, the fuel tax credit is forecast in budget papers to climb from about $10.8 billion this financial year to roughly $13 billion by 2028 to 29, with close to half of that support flowing to resource companies, including around $1.4 billion each for iron ore and coal operations.
On the other side, unions, climate groups and internal party activists are pushing for the fuel subsidy to be wound back or capped, arguing that a generous rebate dulls the financial incentive to cut diesel use and invest faster in low emissions equipment. Some proposals call for annual caps in the tens of millions of dollars per business while policy advisers suggest scrapping credits for heavy trucks on public roads altogether. Their case relies on analysis showing research and development spending in Australia as a share of total investment has fallen by more than 40% over three decades, which they see as a signal that public money should shift from subsidising fossil fuel consumption towards backing cleaner innovation.
The broader outcome is likely to depend on how quickly zero emissions mining technology can be proven at scale and how much short term budget and emissions pressure the government is willing to tolerate. If the rebate stays largely intact, miners keep cost stability but critics will say taxpayers are funding slower decarbonisation. If it is cut or capped, the sector faces higher operating bills that could speed up technology adoption but also raise concerns about competitiveness and regional jobs. For now, the government appears cautious, signalling support for the credit scheme while leaving the door open to gradual reform as new equipment, power infrastructure and hydrogen projects evolve in the next decade.
