Squaring the circle of Australia’s coal mining ambitions

The Loy Yang brown coal-fired thermal power station in south-eastern Victoria, Australia. Credit: RobynCharnley / Shutterstock

Over the past year, the government of Anthony Albanese has approved seven coal mining extension projects, a move that has divided opinion over the country’s ability to meet climate targets. 

Four of these approvals (Caval Ridge, Boggabri, Lake Vermont and Vulcan South) were announced in December 2024, hot on the heels of three expansion projects in the Hunter Valley, announced that September. 

To some, the approvals constitute a promise to maintain a crucial pillar of the Australian economy, with the Mining and Energy Union saying the Hunter Valley projects will safeguard the jobs of more than 1,800 workers and support communities “largely dependent on the mining industry”. 

In addition, as most of the new projects will produce metallurgical (met) rather than thermal coal (used for making steel, rather than for coal-fired power stations), supporters argue they are essential for making renewable infrastructure such as wind farms and solar panels. Environment minister Tanya Plibersek even argued there are “no feasible renewable alternatives for making steel”. 

Yet the approvals (and Plibersek’s comments) have sparked backlash. Critics fear that these projects could push Australia past its emissions limits – and uphold an energy source that is increasingly outdated. 

Given the Australian Government’s commitment to net-zero emissions by 2050, as well as an industry prediction that coal demand will in fact decline in the coming years, the question arises of what motivated the approvals, and how Australia can maintain both its coal mining ambitions and climate targets.

Coal is Australia's largest energy resource, and between 2021 and 2022 the country was the world’s largest exporter of metallurgical coal and the second-largest exporter of thermal coal. 

There has been some progression towards a clean energy model in recent years, and the Labour Government has made pursuit of this goal a key part of its energy model. 

Indeed, Plibersek announced that the government had “ticked off a record 68 renewable energy projects” last year, while a GlobalData report found up to 16GW of coal-fired generation capacity is set to be retired by 2040 to meet the government's pledge of reaching 52% renewable electricity generation by 2030.

This target may seem at odds with the recent coal expansions, but it fits with Australia’s emissions policy in its Safeguard Mechanism. The scheme mandates a 4.9% annual emissions reduction from heavy industries by 2030. However, it focuses on scope 1 emissions (those generated from burning fuels domestically), and excludes scope 2 and 3 emissions, which are generated by exported materials. 

As most of Australia’s coal is exported, the latest projects are therefore excluded from its current emission targets. 

“Right now, a country such as Australia could have 100% renewable energy power generation, but could export considerable amounts of emissions to other countries and still call itself a climate leader,” says Chris Wright, climate strategy adviser at policy think tank Ember. 

“Australia is effectively arguing that the less we use domestically, the more we can sell internationally,” he adds. 

There are some who maintain that coal will remain a backbone of Australia’s energy mix for some time. Dale Last, the new Minister for Natural Resources and Mines in Queensland, told MINE Australia that coal and gas will continue to “play crucial roles” in the state’s energy system for years to come. 

Similarly, the New South Wales Government’s mineral and coal exploration statement said exploration is “fundamental” to realising the full economic benefit of the state’s resources. 

Yet there are rumblings that coal demand is set for a decline, something which could dampen Australia’s coal aspirations.

According to the International Energy Agency’s 2024 annual coal report, net coal imports are expected to shrink over the next three years due to nations pursuing a clean energy transition, coupled with Australia’s main steel markets of India and China diversifying their imports away from Australia. 

Similarly, GlobalData figures found that coal production is set to “decline sharply” from 2027 due to the planned closure of 24 mines, with miners set to face a number of financial challenges.

“Australian coal miners are facing cost inflation pressures, including higher labour, fuel and distribution costs,” the report reads. “Coal royalties and rising expenses related to emissions management is further adding to the financial challenges for coal miners.” 

In this landscape, there is a disconnect between government and industry predictions, and questions have been raised about the rationale behind Australia ramping up coal usage.

“The Australian Government keeps insisting that met coal is still essential, despite growing evidence to the contrary,” says Simon Nicholas, lead energy analyst at the Institute for Energy Economics and Financial Analysis (IEEFA). “It keeps forecasting growing exports, but Australia's actual met coal exports have been in decline for the last five years.”

When it comes to the motivation behind the approvals, Nicholas points to politics.

“It doesn't make much sense to keep opening up new capacity in a declining market,” he said. “I think we have to assume the approvals are largely political – the Labour Government doesn’t want to be attacked for denying approval for these mines, especially in the run up to an election.”

As environmental regulations become stricter, there is also the sense that coal projects are being pushed through before more stringent measures are implemented. 

“I believe coal miners are racing to get these approvals in early before what they can see is the writing on the wall, essentially that climate will continue to be a larger and a larger concern, particularly when it comes to the coal mining sector,” says Wright.

Despite the anticipated decline, coal is still currently a huge income generator for Australia and calls for projects to be scrapped are unlikely to be heeded. In addition, while emission-reducing technologies are available, there is currently little incentive to implement these measures – with the added operational costs not offset by financial benefits for green products.

As such, for Australia to close in on its emission targets, Wright says there is the need for revised regulations and greater government action.

“The Safeguard Mechanism has the bones of what could be a valuable home for emissions cuts in the coal sector, but it needs critical renovations, especially in regard to its inability to incentivise onsite mitigation while allowing unlimited access to offsets,” Wright says.

Additionally, Wright suggests that the Labour Government could include a ban on new greenfield or thermal coal mines as part of its policy, such as actions taken by countries like the UK. While it may not get Australia to its 1.5°C emissions cap, he said it would signal to the global stage that it is taking calls to ramp down coal seriously.

“There is a massive structural shift that needs to take place, but you need to attack it with a series of steps,” he adds. “There is no silver bullet here that we can really approach it with, but if Australia is going to continue to engage as a coal exporter, we should try to do it as best as we possibly can, and set international best practice standards in doing so.” 

The road to decarbonisation is challenging, but it is also an opportunity to take part in the growing green energy industry. 

For example, despite Plibersek’s comments, green steelmaking alternatives already exist (Swedish companies announced plans to sell the world’s first green steel two years ago), and the need for metallurgical coal is expected to decline.

“Carbon capture and storage for coal-based steelmaking is going nowhere,” says Nicholas. “As such, steelmakers will need to increasingly shift away from coal to hit their emissions targets.”

While coal in Australia is not going without a fight, growing environmental concerns and the decreasing cost of renewable energy technologies mean the country is naturally shifting to more sustainable energy sources, and Nicholas argues the move away from coal is inevitable.

“There is a question as to whether Australia can manage the transition away from coal effectively,” he says, “but either way the transition isn’t stoppable because Australia’s coal customers will make it happen in the longer term.”