Who Really Pays? Australia’s Climate Justice Crisis

Chelsea Golding | Climate and Environment Fellow

Image sourced from Jonhn Englart via Flickr.

“Don’t be afraid, don’t be scared, it won’t hurt you. It’s coal.”

These were the now famous words of Scott Morrison in 2017 as he paraded a lacquered lump of coal through Australian Parliament. The moment was an unmistakable defence of Australia’s multi-billion-dollar fossil fuel industry and came only a year after Australia had signed the Paris Agreement, recognising the urgent need to confront climate change. Since then, successive governments have approved a dozen new coal mines and supported the continuation of fossil fuel exports. While Morrison’s coal was coated to avoid dirtying the hands of the parliamentarians who handled it, the recent International Court of Justice Advisory Opinion (ICJAO) confronts Australia with climate consequences of which they cannot so easily wash their hands.

Australia is now faced with the need to deliver significant international climate reparations to vulnerable nations. Alongside this however, significant reform of domestic legislation is needed to ensure the burden of these reparations is not left to fall disproportionately on everyday Australians. Meeting this requires overhauling the systems that have enabled major fossil fuel companies to exploit tax loopholes and subsidies, concentrating profits and socialising harm.

The ICJ Ruling: A New Standard for Climate Justice

On the 23^rd of July 2025, the ICJ issued a landmark ruling on state responsibility regarding climate change. The verdict, one of only five unanimous rulings in the court’s 88-year history, unequivocally determined that states are now under the obligation of international law to prevent, mitigate and remedy climate harms, encompassing actions across the past, present and future. The decision clearly instructs Australia to rapidly cut emissions, both from domestic activities and fossil fuel exports, and reaffirms their legal responsibility to contribute to international reparations. 

The purpose of the ICJAO decision was to create an enforceable mechanism to embed climate justice at the international level.  Underpinning this decision is the notion of ‘polluter pays’, which holds that those who have contributed the most to climate change should bear responsibility for reparations and damages to those who will suffer the consequences. The ICJ reinforces this principle at a multinational level, recognising that some states like Australia have disproportionately benefited from fossil fuels and extractive industries.

Domestic Disparity

Though it may be straightforward to acknowledge which states have and have not benefitted on an international level, the allocation of blame becomes more complex when considering how the benefits from these industries have been shared within individual countries. If the ICJ ruling demands that states confront the uneven global distribution of climate costs and benefits, then how should Australia address the disparities within its own borders?

In 2024, the nation’s mining sector brought in AUD$176 billion in gross profits, accounting for more than 14 per cent of GDP. At the same time, fossil fuel subsidies reached AUD$14.5 billion, while 73 out of 134 companies paid no tax on a combined AUD $164 billion in income. Indeed, many of these companies spent more on political lobbying than they paid in tax.

Several developed countries such as Norway channel oil and gas revenues into sovereign wealth funds, with Norway’s alone totalling AUD$1.99 trillion for social welfare and intergenerational benefit. Yet Australia lacks any comparable public benefit structure for its fossil fuel earnings, meaning profits remain concentrated among a small group of corporate interests. This disparity underscores the urgent need for Australia to review its legal frameworks and enforce the principle of polluter pays at a domestic level, not just internationally.

The Path Forward

Significant reform is required for Australia is to meet its international obligations without worsening domestic inequality. At a minimum, Australia must respond to the ICJAO by dismantling fossil fuel subsidies and reallocating funds towards climate adaption and mitigation.

These include programs such as the ‘Fuel Tax Credit Scheme’ (FTCS), which currently stands as the country’s largest fossil fuel subsidy and offers a refund system for fuel tax paid by businesses, largely benefiting mining industries.  Calls to end subsidies such as the FTCS in Australia are not a new motive brought forward by the ICJ ruling. In fact, abolishing the Fuel Tax Credit Scheme and similar subsidy systems has been specifically called for by the OECD and think tanks such as the Australia Institute, specifically to free up money for domestic and international climate mitigation.

Beyond subsidies, equally urgent attention must be given to addressing current tax loopholes, such as the Petroleum Resource Rent Tax (PRRT). Originally designed as a mechanism for the profits from Oil and Gas resources to reach everyday Australians, the scheme has instead created the opportunity for companies to claim huge deductions through loopholes, allowing them to pay little to no PRRT. Removing these exploitable tax clauses would ensure that the ICJ’s ‘polluter pays’ principle applies domestically, making sure that those who have disproportionately benefitted are held proportionately responsible.

With the ICJ ruling, Australia faces a clear moral and legal mandate to deliver climate justice internationally. Yet the real test of the nation’s climate leadership will be in seeing whether the necessary reforms and actions are undertaken to ensure this mandate is upheld properly at home – by the government itself, not just the everyday Australian.

Chelsea Golding is the Climate and Environment Fellow for Young Australians in International Affairs. Chelsea is an undergraduate at the University of Queensland, pursuing a dual Bachelor of Science and Bachelor of Arts.

She has conducted policy research on offshore wind development in Australia, contributed to marine spatial planning studies, and drafted environmental legislation. Her international experience spans Malta and the Philippines, ranging from marine animal studies and coastal habitat monitoring to regulatory reviews and community-based marine policy evaluations.

As UQU’s Environmental Officer, Chelsea co-founded the Environmental Collective column and led campus sustainability initiatives. She has worked across government and research sectors and is especially interested in environmental justice and climate resilience in the Indo-Pacific.

Our 2025 Climate and Environment Fellow is sponsored by the Sydney Environmental Institute. For more information, visit their website here.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Young Australians in International Affairs. All content is original, and no plagiarism has been used in the preparation of this article.