This year’s Federal Budget will need to reveal a shift in financial priorities in order for Australia to start addressing commitments made at the UN climate talks in Paris in December, the Australian Conservation Foundation said today.

The Paris agreement commits countries to limit the increase in global temperatures to “well below 2°C” and to aim for it to be less than 1.5°C above pre-industrial levels.

“The Paris commitments necessitate a change in the way countries prioritise their finances, particularly when it comes to energy,” said ACF’s economist Matthew Rose.

“This Budget provides the opportunity for the Turnbull Government to reset the nation’s finances so we stop giving handout to dirty energy and start prioritising clean energy.

“In ACF’s view the most urgent priority is the reform of the Fuel Tax Credits scheme, which costs the Government around $6 billion every year in forfeited expenditure.

“While most Australians pay 39 cents in tax per litre of fuel they purchase, big mining companies get a complete tax refund on their diesel under this scheme.”

ACF’s Budget submission, lodged with Treasury today, sets out three options for reforming the Fuel Tax Credits scheme:

1.    Cap Fuel Tax Credit claims at $20,000 per claimant, so those making small claims, like farmers, are not adversely affected.  The average claim by farmers is well below $20,000.  In comparison the coal mining industry’s average claim is almost $950,000.  This reform would save the federal budget $15 billion over the forward estimates. 

2.    Scrap the scheme and reinvest the money in R&D.  Removing the diesel subsidy would free up $6 billion a year that could be spent on research and development on, for example, energy efficiency and reducing fuel use.

3.    Make claimants prove their operations are becoming more efficient.  If the Government is determined to give out $6 billion a year in Fuel Tax Credits, it should put conditions on the handouts.  Claimants could be required to show how they are making their operations more fuel efficient and preparing for a future that is consistent with the Government’s commitment to limit global warming to well below 2°C.

“The diesel subsidy should not continue to hold back Australian progress on climate change,” Mr Rose said.

ACF’s Federal Budget submission

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