Introduction

Mining is a primary driver of Australia’s significant diesel dependency. As a discrete activity, mining is the country’s second-largest diesel consumer, responsible for 7.66 gigalitres (GL) of annual consumption. When including transport and other services, mining becomes the largest diesel-using industry, consuming 11.5GL, or 35% of the national total. Mining’s diesel demand has increased faster than overall national consumption since 2010. Concurrently, domestic oil production and refining capacity have declined, leading to a reliance on international supply chains where imports now meet more than 90% of Australia’s annual diesel consumption.

Diesel use varies widely by sector and applications

Mining is universally diesel-intensive, though consumption patterns differ across sub-sectors. Coal mining uses approximately eight times as much diesel as electricity. While coal directly consumes 3.97GL (predominantly by mobile plant), adding transport and services brings its total footprint to 4.79GL. Iron ore dominates non-coal diesel demand; mobile plant in this sector consumes about 3.3GL annually, with an additional 1.5GL used for off-grid power and transport, totalling 4.8GL. Together, coal and iron ore account for more than 80% of mining diesel use. Changes in diesel intensity—volume per tonne produced—significantly impact consumption, particularly through factors like higher strip ratios in open-cut coal operations, which have driven a 74% increase in intensity since FY2010–11.

Short-term options to reduce diesel demand

Various short-term measures can reduce diesel consumption in mobile plant, transport, and electricity generation. For mobile plant, site planning involving asset siting and intelligent layouts can reduce fuel use by minimising travel distances and idling. Improved site maintenance, such as haul road quality, has saved up to 17% in fuel in some operations. Fleet management, including payload optimisation, ensures haul trucks operate within 95% of target ranges, potentially offering fuel savings of 35%.

Driver and operator behaviour also influences consumption; smooth braking and accelerating can contribute to a 10% fuel saving. Equipment modifications, such as low rolling-resistance tyres and engine idle-control technologies, provide further gains. In transport, rail is at least three times as fuel-efficient as road. Potential savings also exist in electricity generation by displacing diesel with renewables and battery storage, or through technology-aided generator improvements that optimise load matching to 50–80% capacity.

Huge fuel savings possible if barriers can be overcome

Combined fuel-efficiency solutions suggest that diesel savings of 10–20% are possible in mining, equating to 1.15–2.3GL of diesel saved per year. Consumption is highly concentrated; 15 companies, led by BHP, consume almost 6GL of diesel annually. This concentration allows for large-scale corporate resource leveraging. However, several barriers persist. These include a high dependence on contracting, where split incentives between miners and contractors complicate efficiency efforts, and workforce challenges such as high staff turnover and skill mismatches.

Regulatory disincentives are significant. The Fuel Tax Credit (FTC) system granted AU$4.6 billion to the sector in FY2024–25, reducing the cost of off-road diesel and acting as a disincentive for fuel saving. Additionally, the Safeguard Mechanism’s current structure allows compliance through cheap offsets rather than operational changes. Poor industry co-operation and the volatility of commodity cycles also hinder the adoption of best practices.

Policy priorities and recommendations

The government can advance solutions through several short-term priorities. It should establish clear objectives, including a 10–20% diesel-reduction target for mining, and require companies consuming more than 100ML annually to formulate and disclose diesel-saving plans. To resolve workforce and contracting challenges, the government should work with industry associations to ensure fuel-saving messages reach the broader workforce and investigate targeted financial support for smaller miners to meet capital costs for efficiency measures. Removing competition law barriers that prohibit joint purchases or information sharing regarding transport optimisation is also recommended.

Scale back incentives for sustained diesel use

Initial reforms to the FTC system should be enacted, including diminishing eligibility for miners that fail to meet efficiency benchmarks. In the longer term, the government should create minimum fuel efficiency standards, beginning with coal and iron ore. The Safeguard Mechanism review in 2026 should introduce fuel-saving reforms and emissions baselines reflecting global best practices. Finally, a legislated schedule for phasing out diesel FTCs should be developed, potentially capping credits at AU$50 million per company and requiring excess rebates to be invested in diesel-avoiding technologies.