On Monday, former industry ministry Ian Macfarlane raised the issue at a backbench policy committee meeting attended by the chief executive of the Minerals Council of Australia, Brendan Pearson.

The National Farmers' Federation was also exercised and the Nationals resolved to oppose the communique at their weekly party room meeting on Monday.

"It's not a subsidy. It's a rebate because a tractor is not going down the M1 planting sorghum," said Nationals deputy leader Barnaby Joyce.

Queensland Liberal-National MP George Christensen took to Twitter.

"To sign this is madness. It will cost jobs & give greens ammo to attack coal further," he tweeted.

The government is unlikely to cut the diesel fuel rebate after concern from mining companies. Robert Rough

The Fossil-Fuel Subsidy Reform Communique speaks of "an urgent need" to transform into action previous global agreement s to stamp out such subsidies as part of the push to keep the increase in global warming to 2 degrees Celsius.

"The elimination of fossil-fuel subsidies would make a significant contribution to this shared objective," it says.


"By keeping prices artificially low, fossil-fuel subsidies encourage wasteful consumption, disadvantage renewable energy, and depress investment in energy efficiency.

"The International Energy Agency highlights fossil-fuel subsidy reforms as a key component of a set of energy measures to combat climate change and estimates that even a partial phase-out of fossil-fuel subsidies would generate 12 per cent of total abatement needed by 2020 to keep the door open to the 2degC target."

$5.5b a year

Each year, the 38¢-a-litre diesel excise rebate costs the budget abut $5.5 billion but is not classified officially as a subsidy.

It is returned to mining, agriculture and other commercial users in dual ­recognition that they do not use public roads and that diesel is a business input. For example, the majority of diesel used by miners is to run electricity ­generators.

On this basis, the government was to sign the communique on the basis diesel was "subsidised" but "rebated".

While not binding per se, people like Mr Macfarlane argued the communique would pose an eventual threat to the rebate because it would give other nations greater leverage to pressure Australia over time.

The Australian Conservation Foundation said the communique had been an "early test" for Mr Turnbull in Paris.


"If the federal government is serious about tackling climate change and about letting the market work, it should stop subsidising big polluters to pollute," said ACF chief economist Matthew Rose.

The MCA declined to comment but was happy with the outcome.

The backdown indicates the sensitivities that still exist in the the Coalition six weeks after Mr Turnbull deposed Tony Abbott for the leadership.

Also on Monday, Treasurer Scott Morrison sprung to the defence of Australia's Islamic community following a series of strong statements led by Resources Minister Josh Frydenberg and Liberal backbenchers that the Grand Mufti and the community in general needed to do more to condemn radical Islam.

Mr Morrison said over time, the Islamic community would become more in tune with Australian culture.

"Over a period of time I think religions become more indigenised in Australia. The cultural component of our religious faiths I think becomes more indigenised," he said.

He said those criticising the Mufti were misguided.

"There are many different leaders within the Islamic community. It is not the sort of representational structure that you see in other organised religions in Australia," he said.

"It's quite different. I think the commentary that assumes very similar structures fails to get it, frankly."

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