<?php 

add_action('woocommerce_cart_calculate_fees', 'add_discount_for_shipping_method', 10, 1);
function add_discount_for_shipping_method($cart) {
    // Below check required ONLY if you can't control the deployment of this snippet.
	// It **must** execute on FRONT END ONLY.
    if (is_admin() && !defined('DOING_AJAX')) {
        return;
    }
    
    $targeted_shipping_method = 'flat_rate:3';      // Change this depending on your shipping method (slug:id)
    $discount = -5;                                // Applied discount in currency units

    $chosen_shipping_methods = WC()->session->get('chosen_shipping_methods');
    $chosen_shipping_method = reset($chosen_shipping_methods);

    if($chosen_shipping_method == $targeted_shipping_method) {
        $cart->add_fee(__('Shipping Discount', 'woocommerce'), $discount);
    }
}