Mining giant BHP has come under fire for spending hundreds of millions of dollars on new diesel trucks in the Pilbara, despite promising a transition to electric trucks in its climate strategy.

Like other mining companies, BHP’s diesel-driven fleet is eligible for fuel tax credits on diesel. The company’s controversial decision to shelve its plans raises the pressing issue of the diesel fuel rebate.

This rebate began as targeted support for a struggling agricultural sector in the 1980s, but has morphed into an almost $5 billion subsidy for some of the nation’s most profitable corporations.

So, what is the diesel fuel rebate? And is this fossil fuel subsidy still fit for purpose?

Why do we have a diesel rebate?

Since federation in 1901, diesel and petroleum products imported into Australia have been subject to import taxes. Since 1929, tax collected from the petrol pump has been earmarked to build and maintain the nation’s road network.

Australia’s diesel fuel rebate scheme was introduced in 1982. The Fuel Tax Credits Scheme, as it’s officially known, was designed to cushion farmers from rising fuel costs.

Farm and mine businesses buying diesel for off-road uses like tractors, harvesters and irrigation pumps could claim a rebate. At the time, Australia’s mining sector was far smaller.

Now, 44 years later, the rebate scheme still allows businesses like agriculture and mining to claim back the federal fuel tax paid on diesel used in eligible machinery, equipment and heavy vehicles.

Today, the mining........

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