DFTC

Fixing the Diesel Fuel Tax Rebate. Redirecting billions to protect our Climate

Fairer. Faster. Smarter.

Australians from every walk of life are now living with the reality of climate‑driven bushfires, floods and storms, alongside the rising costs and stresses these disasters bring. The Albanese Government has committed to bold plans for climate action which aims to transform an economy built on fossil fuels to one powered by renewable energy. But this transformation is complex and LEAN continues to look for opportunities to quicken the pace of action for both emissions reduction and economic transformation.

Australia’s Climate Action So Far

Since 2022, the Federal Labor Government has rolled out the most active
climate agenda in our history:

Reformed the Safeguard Mechanism to cut industrial emissions

Upgrading the electricity grid

Helping households and businesses go electric

Investing in clean energy export industries to replace fossil fuel exports and create new jobs

Reformed national environment laws to speed up renewables while protecting nature

This is BIG progress. But moving from fossil fuels to clean energy is not just difficult —it’s a constant balancing act, with the Government working to transform the economy while juggling community expectations, misinformation, and political point‑scoring —all while keeping the economy steady and energy reliable during a cost‑of‑living crisis.

LEAN has identified a policy that is now working against the government’s own climate goals. By addressing it, we can unlock faster emissions reductions and accelerate the move away from fossil fuels.

So as part of our commitment to strong climate policy, LEAN’s campaign leading up to Labor’s 2026 National Conference is:

Fixing the Diesel Fuel Rebate—Redirecting Billions to Protect Our Climate: Fairer. Faster. Smarter.

This targeted reform would remove a policy inconsistency that is slowing investment in cleaner technology, unlock faster emissions reductions and ensure Australia’s climate transformation is not only bold in vision, but effective in practice.

The Inconsistency: Diesel Fuel Tax Credit (DFTC)

The Diesel Fuel Tax Credit was originally designed so farmers and other off‑road users could claim back the fuel tax that funded roads. But today, the biggest beneficiaries are giant mining companies. They receive rebates so large that it discourages them from switching to cleaner alternatives like electric mine trucks.

Current rebate: ~51 cents per litre.

Fifteen companies each receive more than $50 million per year.

In 2023–24, they burned nearly 6 billion litres of diesel, received $2.9 billion in rebates, and emitted 16.2 million tonnes of CO2.

Instead of investing in cleaner machinery, it’s cheaper for them to buy carbon offsets under the Safeguard Mechanism. LEAN wants to reform the fund so that mining companies get on with electrifying their vehicles. All of these companies have committed to net zero—we want policy to incentivise electrification, not disincentivise it.

This would not affect farmers and smaller mining companies.

Why It Matters?

Since 2007, the scheme has cost $122.7 billion. By 2030, it’s projected to reach $184 billion.

Of that, the top 15 companies alone will have received $84 billion.

This is money that could be driving decarbonisation—not locking us into more diesel.

LEAN’s Solution: Cap and Redirect

Our proposal is straightforward:

Cap the rebate at $50 million per company per year.
Everyone else—farmers, tourism operators, small businesses—keeps their full rebate.

Anything above the cap goes into a new Decarbonisation Fund.

This fund would:

Allow all companies covered by the Safeguard Mechanism, including mining companies, to apply for rebate support for on-site emissions reduction.
Support investment in clean technology across industries, including hard‑to‑abate sectors like cement.

The Benefits:

Fairer.

Only the biggest polluters are affected.

Faster.

Redirects billions into cutting emissions now.

Smarter.

Strengthens energy security by reducing reliance on imported diesel. Frees up diesel for farmers, tranport companies and tourist operators.

In 2024 figures, this reform would put $2.2 billion into the Decarbonisation Fund—without raising taxes or costing the budget a cent.

In Summary:

Capping the diesel fuel rebate at $50 million per company and creating a Decarbonisation Fund is a fairer, faster, smarter path to Australia’s 2035 targets and net zero. It closes a loophole that rewards pollution, and instead channels billions into clean energy solutions. This reform aligns government policies, accelerates real emissions reductions, and strengthens Australia’s energy security—ensuring our communities are protected from climate impacts and our economy is prepared for the future.