Australia

Australia’s current policies are rated as “Insufficient” against modelled domestic pathways. The “Insufficient” rating indicates that Australia’s climate policies and action in 2030 need substantial improvements to be consistent with limiting warming to 1.5°C. If all countries were to follow Australia’s approach, warming would reach over 2°C and up to 3°C.

The CAT’s policies and action scenarios’ low end is based on the Australian government’s 2024 emissions projections, while the upper end is based on a counterfactual scenario where renewables deployment aligns with the International Energy forecasts, falling short of the government’s power sector target. The government projects that emissions including LULUCF will fall to 42.6% below 2005 levels by 2030, compared to its target of 43%.

Following historical emissions revisions published after the government’s projections’ release, Australia is now expected to meet the NDC target, including LULUCF. Excluding LULUCF, emissions are expected by the government to fall to 23% below 2005 levels by 2030. In contrast, under current trends and policies for renewables deployment, emissions would decline by only 15% below 2005 levels by 2030.

Further information on how the CAT rates countries (against modelled domestic pathways and fair share) can be found here.

Although the government introduced several new policies towards the end of 2023 and throughout 2024, mostly in the power, transport, and industry sectors, they were accompanied by continued support for both coal and fossil gas production for many decades to come. The ongoing revisions of historical and projected LULUCF estimates put the government closer to meeting its emissions reduction targets without making meaningful emissions reductions across the economy. Meanwhile, Australia’s policy gap for the agriculture, buildings, and waste sectors remains; these sectors will be key to aligning with the 2050 net zero goal.

Australia’s policies and actions are projected to lead to emissions 15–23% below 2005 levels by 2030, excluding LULUCF, that is 411–454 MtCO₂e by 2030.

Slow progress towards 82% renewable energy

The Capacity Investment Scheme (CIS), expanded in November 2023, is the government’s main instrument to bridge the significant gap to its 82% renewable electricity target for on-grid generation by 2030 (DCCEEW, 2024b; Open Electricity, 2024a, 2024b). The CIS aims to deliver 32 GW of new clean energy capacity by 2030, comprised of 23 GW of variable renewable capacity and 9 GW of dispatchable capacity, such as battery storage.

The independent Climate Change Authority (CCA), tasked with assessing the government's progress on its climate targets, indicates that without further action it will fall short. It finds that the current pipeline of renewable energy projects is insufficient and that an additional 8 GW of utility-scale renewable energy projects are required, on top of the expanded CIS, to ensure the government’s target is met (Climate Change Authority, 2024a). Even including this additional capacity, Australia’s renewable energy capacity is far from what is needed for 1.5°C compatibility – almost 170 GW of new wind and solar would be needed by 2030 (120 GW solar, 45 GW wind) (Grant et al., 2024).

While not legislated, the 82% renewables target applies to the nation’s four main grids, but not to other minor grids or off-grid generation. On-grid generation accounts for approximately 91% of emissions and 89% of total generation (DCCEEW, 2024c).

Given that a significant amount of generation is off-grid (~10%) which has not yet been addressed by government policy, even if the government’s 82% target is met the nation’s electricity generation would only be 77% renewable by 2030, substantially short of a 1.5°C aligned pathway (DCCEEW, 2024b).

Investment in large-scale renewable generation stalled in 2023, with just AUD 1.5bn committed to new projects, substantially down from AUD 6.5bn in 2022 (Clean Energy Council, 2024). The rollout of renewables in Australia continues to be obstructed by slow planning and environmental approval processes, higher costs, and tighter markets for equipment and labour. This is reflected in forecasts published by the International Energy Agency (IEA), which show that under current trends and policies, the share of renewables in generation would reach only 58% by 2030 (IEA, 2025).

Coal power still accounted for nearly half of Australia’s total generation in 2023, while fossil gas accounted for 18% (DCCEEW, 2024a). There is no explicit emissions reduction policy for the electricity sector, nor a federal-level coal and fossil gas phase-out plan and timeline.

Green industry

In 2024, the government unveiled new energy-related policy documents for the post-fossil fuel exports era. The ‘Future Made in Australia’ plan announced in 2024, allocates AUD 22.7bn (USD 14.9bn) over 10 years to attract investment in key industries and realise Australia’s potential to become a “renewable energy superpower” (Australian Government, 2024). The scheme is targeted at renewable hydrogen, green metals, low-carbon liquid fuels, critical minerals processing, and clean energy manufacturing including battery and solar panel supply chains. The plan does not include support for fossil fuels, but over half of the funding will not commence until 2027.

The government’s updated National Hydrogen Strategy, released in 2024, sets targets for both production and export of hydrogen (DCCEEW, 2024d). The strategy specifically targets renewable-based hydrogen, which is an improvement on the 2019 strategy which also encompassed fossil fuel-derived hydrogen.

No end in sight to fossil fuels

The government has also reaffirmed its commitment to fossil fuel production and exports. In some of the most impactful decisions made by the Albanese government, the government approved three coal mine extensions in September 2024, allowing them to continue operating for another 30–40 years (ABC News, 2024c; The Guardian, 2024). These decisions will result in well over an additional billion tonnes of CO₂ being emitted to the atmosphere, on top of the four previous coal mining approvals issued in 2023 (The Australia Institute, 2024b). Albanese government’s continued support for new fossil fuel projects – for coal, oil and fossil gas, is expected to release 2.6 GtCO₂e over their lifetime (Verstegen, 2023).

Australia remains a massive exporter of fossil fuels and, in 2023, was the world’s second-largest exporter of coal and third-largest exporter of liquefied natural gas (LNG) (Energy Institute, 2024). The government’s Future Gas Strategy, released in May 2024, doubles down on the role of gas in Australia’s domestic energy sector and exports to 2050, and beyond (DISR, 2024a). The strategy reinforces the government’s ongoing commitment to development of new fossil gas supply and continued LNG exports.

The Safeguard Mechanism

The Safeguard Mechanism, the Australian government’s central policy for reducing emissions from large industrial facilities, is not delivering the scale of transformation required for a 1.5°C pathway. In 2024, the 215 facilities covered by the mechanism emitted 136 MtCO₂e (26% of Australia’s total emissions excluding LULUCF) (Climate Change Authority, 2024a; DCCEEW, 2025d).

The mechanism allows for unlimited use of offsets to meet declining baselines, creating uncertainty about actual emissions reductions achieved and the effectiveness of the scheme. Modelling undertaken for the government and for the CCA found that 58–68% of reductions under the SGM to 2030 could be met with offsets rather than onsite emissions reductions (Climate Change Authority, 2024a). Without stronger restrictions on offsets or clearer incentives for decarbonisation at the facility level, the mechanism risks delaying the structural change needed across high-emitting sectors such as mining, oil and gas, and heavy industry.

Transport sector

The transport sector is projected to become the greatest source of emissions by 2030, as power sector emissions decline (DCCEEW, 2024b). The government’s long-awaited New Vehicle Efficiency Standard (NVES) was introduced in 2024 and applies to new cars sold from 2025 onward, making Australia one of the last developed countries to adopt such standards (DITRDCA, 2024). The standard sets emissions intensity targets imposed on suppliers across the fleet of vehicles they sell each year. The New Vehicle Efficiency Standard and the National Electric Vehicle Strategy, released in 2023, do not set a strategy, nor targets, for public transport, cargo and modal shift, leaving a gap in the government’s transport sector policies.

The power sector is the greatest source of emissions in Australia, accounting for 29% of total emissions excluding LULUCF in 2024 (DCCEEW, 2024b). Power sector emissions have been declining since 2016, with this trend expected to continue as renewable energy displaces fossil fuels (DCCEEW, 2024b).

The government’s main policies for the power sector are the 82% renewable electricity target and the expanded Capacity Investment Scheme, both discussed in the "Renewables" section below. There is no explicit emissions reduction policy for the electricity sector, nor a federal-level coal and gas phase-out plan and timeline.

The government released the First Nations Clean Energy Strategy in 2024 which aims to empower First Nations communities with clean energy, achieve economic benefits with First Nations people, and enable equitable partnerships (DCCEEW, 2024h).

Australia has four main grids: the National Electricity Market (NEM), the Wholesale Electricity Market (WEM), the Darwin-Katherine Interconnected System (DKIS), and the North-West Interconnected System (NWIS) (DCCEEW, 2024b). The NEM covers the entirety of Australia’s east coast including Tasmania, linking all states and territories except for WA and NT, and delivers around 80% of the country’s power (DCCEEW, 2023b).

Coal

Coal power generation represented 47% of Australia's electricity generation in 2023 (DCCEEW, 2024a). Australia has 18 remaining coal-fired power plants, totaling 22.6 GW, with the majority operating in the NEM (21.3 GW) and the remainder in the WEM (AEMO, 2024a, 2024b).

The government projects that coal will account for 12% of generation in 2030, down from the 20% it projected in 2023. This is required to meet the government’s 82% renewable energy target. However, the government now projects a slower coal phase-out in the short term: coal power generation in 2027 is expected to be 21% above last year’s estimate due to the slow roll-out of renewable energy projects (DCCEEW, 2023b, 2024b). As a result, while the government now assumes that it will meet its 82% renewable electricity target, cumulative emissions from the electricity sector between 2024 and 2030 are now projected to be slightly higher.

To align with a 1.5°C-compatible coal phase out, developed countries must take the lead, phasing out coal from their power systems by 2030 (Climate Action Tracker, 2023a). Australia has not joined the Powering Past Coal Alliance and to this day does not have a coal phase-out strategy.

Following announcements from the Western Australian government, the AEMO expects coal to be phased out of the WEM, under its ‘Expected’ scenario, by 2031 (AEMO, 2024c). However, on the East Coast, coal power is not expected to be phased out of the NEM until 2037 under AEMO’s central ‘Step Change’ scenario (AEMO, 2024b). AEMO expects that 11.4 GW of coal power will still be online in the NEM in 2030.

The Liddel coal power plant, the oldest in Australia, was turned off in April 2023, seven years earlier than originally planned (Sydney Morning Herald, 2023). The 2.88 GW Eraring plant, Australia’s largest remaining coal-fired power station, is the next plant scheduled for retirement from the NEM. It was originally due to close in 2025 but will now continue operating until 2027 after the NSW state government agreed to pay operator Origin Energy up to AUD 450m over two years to cover operating losses (ABC News, 2024a). Australia’s ageing coal fleet is a concern for the power system’s reliability.

Australia's latest energy roadmap forecasts that 90% of the country's remaining coal-fired power generation capacity will retire by 2034–35, with the entire coal fleet phased out by 2038 (McConnell, 2023). This marks an acceleration of the coal exit timeline, but at the same time there's a risk of an increasing use of gas if the renewable energy roll out is not fast enough.

Fossil gas and oil

Fossil gas accounted for 18% of Australia’s generation mix in 2023 (DCCEEW, 2024a). The government projects that this share will fall to 10% by 2030 but then remain steady until 2040 (DCCEEW, 2024b).

Under these projections, fossil gas generation would not fall fast enough to align with 1.5°C compatible benchmarks, which would see Australia’s share of fossil gas in the electricity mix fall to zero by 2035 (Climate Action Tracker, 2023a).

Western Australia (WA) is heavily reliant on fossil gas power which accounted for 61% of generation in 2023. In the WEM, WA’s main grid, this is much lower at 38%, while generation in WA outside of the WEM stood at 82% fossil gas in 2023 (DCCEEW, 2024a; Open Electricity, 2024b).

A significant share of fossil gas from domestic production is used for off-grid generation in mining and LNG production. Notably, more fossil gas is consumed for generation and other energy at LNG plants in Australia (435 PJ in 2023), than at Australia’s gas power plants combined (387 PJ in 2023) (DCCEEW, 2024a). As part of the Future Gas Strategy, the government committed to remain a “reliable and trusted trade and investment partner”, through continued fossil gas exports (DISR, 2024a)

In the major grids, Australia has a gas-fired power capacity of 12 GW in the NEM and 2.9 GW in the WEM (AEMO, 2024b, 2024c). The government projects that nationwide gas power capacity will increase slightly from 22 GW in 2025 to 25 GW by 2040 (DCCEEW, 2024b).

Renewables

Renewable energy accounted for 34% of Australia’s electricity generation in 2023, up from 17% in 2018 (DCCEEW, 2024a). The government has set a target of achieving 82% of renewable electricity generation in the country’s grids by 2030. Although not legally binding, this target has been repeatedly mentioned in various policy documents (DCCEEW, 2022a, 2024b). It applies to the nation’s four main grids (NEM including Mt Isa, WEM, DKIS, NWIS), but does not include other minor grids, nor off-grid generation. Despite being ambitious relative to current rollout, the target still falls short of the 95–96% renewables penetration needed in 2030 for alignment with a 1.5°C compatible pathway (Climate Action Tracker, 2023a).

The Capacity Investment Scheme (CIS) is the main policy aimed at bridging the currently significant gap to the 82% renewable electricity target. The CIS, established in December 2022, is a government underwriting scheme that sets an agreed revenue ‘cap and floor’ for projects selected in a reverse auction tender process (DCCEEW, 2024f).

In November 2023, the government announced an expansion of the CIS, which aims to deliver 32 GW of new clean energy capacity by 2030, comprised of 23 GW of variable renewable capacity and 9 GW of dispatchable capacity, such as battery storage. The government expects the expanded scheme to stimulate AUD 67bn in private investment towards clean energy supply. The first CIS projects are expected to come online from 2026–27 (DCCEEW, 2024f).

Under the government’s baseline scenario underpinning the lower end of the CAT emissions pathway, the share of renewables in the electricity mix is projected to reach 77% nationwide and 82% across the major grids by 2030 (DCCEEW, 2024b). However, the Climate Change Authority (CCA) warns that the current project pipeline is insufficient and that an additional 8 GW of utility-scale renewable energy projects is required, on top of the expanded CIS, to ensure that the government’s target is met for on-grid generation (Climate Change Authority, 2024a). The CCA recommends broadening the CIS, embedding it in legislation, and extending the scheme beyond 2030.

Despite the policy momentum, the rollout of renewables in Australia is slow, and continues to be obstructed by slow planning and environmental approval processes, higher costs, tighter markets for equipment and labour, and issues with social licence and community acceptance (AEMO, 2024b; Clean Energy Council, 2024). Investment in large-scale generation was particularly slow in 2023, with just AUD 1.5bn committed to new projects, substantially down from 6.5bn in 2022 (Clean Energy Council, 2024). In comparison to the government’s target, the International Energy Agency estimates that renewables may generate less than 60% of Australia’s total electricity generation by 2030 under current trends (IEA, 2025). The upper bound of Australia’s current policy projections is based on these projections (see Assumptions).

As of end-2024, renewables penetration of the National Electricity Market, Australia’s largest grid, stood at 39% (Open Electricity, 2024a) and is forecast to increase to 45% in 2025, per government projections (DCCEEW, 2024b).

Australia is a world leader in rooftop solar with approximately 3.7 million households equipped with rooftop solar as of end-2023 (Clean Energy Council, 2024). Rooftop solar supplied 9% of the country’s electricity mix in 2023, while large-scale solar PV supplied a further 6% of electricity (DCCEEW, 2024a).

Wind energy continues to be the greatest individual source of renewable energy in Australia, providing 11% of the overall electricity mix in 2023 (DCCEEW, 2024a). Australia has 13.5 GW installed onshore wind capacity, but currently no offshore wind farms. This is despite having some of the world’s best wind resources and offshore wind technical resource potential, estimated at 2,900 GW (Global Wind Energy Council, 2024). As of end-2024, there were six zones defined as offshore wind areas (DCCEEW, 2024e).

All states and territories except for WA now have some form of renewable energy target (Climate Council, 2024). Both the Australian Capital Territory (ACT) and Tasmania have already achieved 100% of their power supply from renewables. The ACT met this target through wind and solar power purchase agreements for facilities that operate outside its borders (Climate Choices, 2023), while Tasmania’s electricity mostly comes from hydropower. Tasmania has set a new target for 200% renewable energy by 2040 (Gutwein, 2020). SA is targeting 100% renewable energy by 2027 (Climate Council, 2024).

South Australia is identified as a global leader in variable renewable energy (VRE) penetration, with the VRE share reaching 73% in 2023 (DCCEEW, 2024a). High periods of VRE in South Australia are managed by exporting power to neighbouring states, with battery energy storage systems (BESS), and through demand response and curtailment (IEA, 2024b). In December 2022, the supply of solar and wind power accounted for more than 100% of the demand over ten days (RenewEconomy, 2023).

Australia joined the Global Energy Storage and Grids Pledge at COP29 and the Global Renewables and Energy Efficiency pledge at COP28 (Bowen, 2023; DCCEEW, 2024k).

Despite promising developments in government policy and financial support, Australia’s power sector cannot yet be considered on track to meet its 82% renewable energy target, nor is it on a 1.5°C compatible trajectory. Further efforts are needed to remove barriers to renewable rollout and increase the momentum of renewable energy deployment.

Nuclear

Nuclear power is prohibited by law in Australia under the Australian Radiation Protection and Nuclear Safety Act 1998 (the ARPANS Act), and the Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) (Cronshaw, 2020).

However, nuclear power has recently entered the public debate following the opposition party's proposal to deploy large-scale power plants and small modular reactors on the sites of existing coal plants as part of its 2025 federal elections campaign platform, which it lost (Liberal Party of Australia, 2024).

These plans have been criticised as unrealistic, misaligned with Australia’s already insufficient 2030 climate target, prohibitively expensive, administratively and technically complex, and serving as a tactic to delay the overdue retirement of the ageing coal fleet (Corrs Chambers Westgarth, 2024; Grattan Institute, 2024; IEEFA, 2024).

Australia’s industrial sector, including industrial energy use, industrial process emissions, and fugitive emissions, accounted for 29% of Australia’s total emissions excluding LULUCF in 2024 (DCCEEW, 2024b).

The government announced the ‘Future Made in Australia’ plan in the 2024–25 budget, allocating AUD 22.7bn (USD 14.9bn) over 10 years to attract investment in key industries and realise Australia’s potential to become a “renewable energy superpower” (Australian Government, 2024). Priority industries identified under the scheme include renewable hydrogen, green metals, low-carbon liquid fuels, critical minerals processing, and clean energy manufacturing including battery and solar panel supply chains.

Production tax incentives for renewable hydrogen and critical minerals passed the senate in 2025 under the Future Made in Australia (Production Tax Credit and Other Measures) Bill (DCCEEW, 2025b). However, both the Hydrogen Production Tax Incentive and Critical Minerals Production Tax, which together account for 60% of the Future Made in Australia funding, do not commence until 2027.

Australia is a major exporter of both coal and LNG. Emissions from coal and LNG use at the final export destination are not accounted for in the national greenhouse gas inventory. Australia exports more than double its domestic emissions from its coal, fossil gas and oil exports (Climate Action Tracker, 2023b; Climate Analytics, 2024a).

Coal mining

Australia is the world's largest exporter of metallurgical coal, accounting for around half of all exports, and the second-largest exporter of thermal coal (DISR, 2024c). In 2023, Australia was the second-largest coal exporter overall and the fifth-largest coal producer (Energy Institute, 2024). Despite a projected decline in domestic coal power, coal production and exports are forecast to remain stable, at odds with the global efforts towards decarbonisation. Close to 90% of produced coal was exported in 2023(DCCEEW, 2024a).

The government projects that run-of-mine coal production will increase by 9% from 559 Mt in 2023 to 612 Mt in 2027, before falling to 488 Mt by 2035 (DCCEEW, 2024m). Sustained or even increasing levels of coal production are clearly inconsistent with the goals of the Paris Agreement (IEA, 2023c). 1.5°C compatible pathways would see coal production fall 78% below 2020 levels by 2030 (SEI et al., 2023).

Government approval of coal mine projects remains a contentious issue in Australia. In September 2024, the Environment Minister gave the green light for three NSW mines to extend their operations for another 30–40 years: the Narrabri Underground Mine Stage 3 expansion, the Ravensworth Underground Mine, and the Mount Pleasant project (ABC News, 2024c; The Guardian, 2024). Combined, these three projects are expected to result in additional emissions of 1.36 GtCO₂e (The Australia Institute, 2024b). These approvals are in addition to the four coal mining projects approved in 2023: the Isaac River and Ensham mines in Queensland, and the Narrabri Underground and Mount Pleasant mines in NSW.

As of December 2024, there were 47 coal projects in the development pipeline, of which ten were already committed (DISR, 2024b).

Fugitive emissions from coal mining are discussed below in the "Methane" section.

Oil & gas production

Australia was the world's third-largest exporter of liquefied natural gas (LNG) in 2023, after being the largest exporter in 2021 (Energy Institute, 2024). Around 80% of fossil gas production goes towards LNG production for export, including LNG plant own consumption (DCCEEW, 2023a).

The Federal government released its Future Gas Strategy in May 2024 which sets out the government’s ongoing commitment to the development of new fossil gas supply and continued LNG exports as a “reliable and trusted trade and investment partner” (DISR, 2024a). The strategy embeds the role of fossil gas in Australia’s domestic energy sector and exports to 2050 and beyond, and (wrongly) claims that fossil gas is needed for the global energy transition. This is despite the inclusion of the IEA’s Net Zero Emissions scenario in the analysis, which clearly calls for a rapid decline in global gas demand (IEA, 2023c). As is the case for coal, Australia still does not have a gas phase-out strategy and timeline.

The government projects that LNG production and export will be sustained at current levels until at least 2035, with 82 Mt expected in 2035 – the same as 2023 levels (DCCEEW, 2024m). These projected exports account for several large-scale projects sanctioned across 2021 and 2022.

• The Barossa backfill to Santos’ Darwin LNG is expected to commence in 2025.
• Woodside’s massive Scarborough development and linked Pluto LNG plant expansion is expected to start up in 27.
• Backfill to Shell’s Prelude FLNG facility from the Crux field is expected to come online in 2027.
• Japan’s Inpex is moving forward with plans to expand its LNG production in Australia by developing a third processing train for its Ichthys LNG project in Darwin (Hale, 2025b).
• Tamboran Resources and Santos have signed a non-binding Memorandum of Understanding (MOU) to explore the potential expansion of the Darwin LNG (DLNG) facility, which could include a second train (Hale, 2025a).

Both Crux and Barossa are carbon-intensive fields with a high percentage of reservoir CO₂ (DCCEEW, 2022b). The government’s LNG projections also assume that Woodside’s Browse project would start up in 2031, but the project's approval stalled with the state Environment Protection Agency for six years and is now pending the federal government’s green light (Battersby, 2025).

Another Woodside project, a forty year lifetime extension of the North West Shelf LNG plant, which accounts for nearly 20% of Australia’s LNG export capacity, was also approved by both state and federal governments to operate until 2070, 20 years beyond the point when Australia is meant to have reached net zero (ABC, 2025).

The biggest uncertainty for future gas production in Australia is Tamboran Resources’ plan to frack the Beetaloo basin in the Northern Territory (NT) and export the gas via a new 6.6 Mtpa LNG plant to be built in the Middle Arm Precinct in Darwin. This could eventually be expanded to 20 Mtpa.

Far from achieving net zero domestic lifecycle emissions, as recommended by the NT government’s Pepper Inquiry, emissions from Beetaloo and Middle Arm development are severely underestimated, and the potential to offset its emissions are greatly exaggerated: it would generate more emissions than the 2030 emissions reduction goal under the Safeguard Mechanism regulations, and require international offsets currently banned under that legislation (Climate Analytics, 2023).

The Middle Arm development was the subject of a recent federal Senate Inquiry into the environmental impact of the development and the federal government’s AUD 1.5bn commitment for the project, which failed to reach a unanimous set of recommendations (ABC News, 2024b). Despite being presented as a sustainable precinct, the industrial project could include fossil gas-generated hydrogen (“blue” hydrogen) production, minerals processing, and petrochemical processing, in addition to the current and planned LNG facilities (ABC News, 2024b). Fossil gas companies are also exploring opportunities to frack the Canning Basin, in WA (ABC News, 2023b; Climate Analytics, 2024b).

In Western Australia, in February 2025 the government agreed to only a "light touch" approval process for Black Mountain’s Valhalla fracking proposal – the first in the pristine wilderness of the Kimberley basin. The first, 20-well tranche of the operation is the leading edge of what could become a massively destructive industry aimed at keeping Woodside’s LNG plant going until 2070. The project, if developed as planned, would add 1.8–2.6% to Australia’s emissions. Everything points to its gas – and that of three other fracking companies waiting in the wings – being destined to support Woodside Energy’s Karratha LNG plant, which has been approved to operate through to 2070 by the WA government (Hare, 2025).

The oil and gas industry continues to benefit from significant government support, which included AUD 14.5bn in spending and tax breaks in 2023–24 (The Australia Institute, 2024a). The largest component of this total is the Fuel Tax Credit Scheme at AUD 9.6bn which subsidises fossil fuel consumption. In 2023, the government revised the Petroleum Resource Rent Tax (PRRT) to introduce a cap on the use of deductions by LNG producers to no more than 90% of their assessable income. As of 2023, no Australian LNG project had paid any PRRT (Minister for Finance, 2023). These subsidies support the fossil fuel industry and its exports, despite the need for a global phase-out.

CCS

Carbon capture and storage (CCS) is being proposed as a solution to mitigate reservoir CO₂ from gas fields which historically has been vented directly to the atmosphere. This is the case at Chevron’s Gorgon plant and Santos’ Moomba CCS project, which official commenced operation in 2025 (Government of South Australia, 2025).

Implementing CCS for reservoir CO₂ does nothing to mitigate fugitive methane emissions that occur throughout the gas lifecycle and therefore would mitigate only a portion of the greenhouse gas emissions associated with fossil fuel production. Nevertheless, CCS projects continue to be pursued by gas producers with government backing.

Chevon’s CCS facilities at its Gorgon LNG plant, often billed as the world’s largest CCS operation, have consistently underperformed and fallen short of sequestering the 80% of reservoir CO₂ as required by the project’s state environmental approvals. Despite having an announced annual capture capacity of 4 MtCO₂/year, Gorgon CCS has sequestered just 10 MtCO₂ in total over the five years to August 2024 (ABC News, 2023a; Chevron, 2021, 2024). In the fiscal year of 2024, 1.6 MtCO₂, which is just 30% of its 4 MtCO₂ annual target and its lowest since starting in 2019. This poor performance costing almost AUD 1 bn more in 2023 compared to FY2019–20 to offset the difference and address technical issues (Williamson, 2024).

With the new Moomba project, the first large-scale onshore CCS infrastructure, Santos aims at capturing and sequestering 1.7 MtCO₂ per year from the Cooper domestic gas basin (Government of South Australia, 2025). The company is also developing the Bayu-Undan CCS project to enable the development of the Barossa field offshore near Darwin. The project would involve capturing CO₂ from the carbon-intensive Barossa field, transporting it via Darwin by pipeline, and then sequestering in the depleted Bayu-Undan field in the Timor Sea, off the coast of Timor-L'este. The government’s 2023 sea dumping legislation paves the way for the project to proceed (ABC News, 2023c). The Bayu-Undan CCS project has a design capacity of up to 10 MtCO₂/year and is one of two projects proposed as part of the Middle Arm development, with the other being INPEX’s Bonaparte project (Northern Territory Government, 2024).

The Australian government is counting on CCS as its predominant strategy to reduce fugitive emissions under the Safeguard Mechanism. The government estimates that by 2031, CCS will capture 1 MtCO₂e from LNG facilities, in addition to CO₂ captured at Gorgon, and 1.5 MtCO₂e from domestic gas production at Moomba (DCCEEW, 2024b). The government projects that CCS at LNG plants will scale up to 5 MtCO₂e by 2040. However, given the experience at Gorgon, it is doubtful whether any of these projects will achieve their design capture rate.

Hydrogen

In 2024, the government released an updated National Hydrogen Strategy (DCCEEW, 2024d). Under the new strategy, the government has set baseline and stretch targets for renewable hydrogen production of 0.5–1.5 million tonnes per year by 2030 and 15–30 million tonnes per year by 2050. The government is also targeting exports of green hydrogen (or equivalent derivatives) of 0.2 million tonnes by 2030, and a stretch target of 1.2 million tonnes.

The 2024 Strategy marks a shift from the 2019 version by explicitly prioritising renewable hydrogen. While the earlier strategy defined "clean hydrogen" more broadly – including fossil-based hydrogen with >90% carbon capture – the revised framework narrows its focus to electrolysis powered by renewable electricity. The Guarantee of Origin Scheme will measure and verify the emissions intensity of produced hydrogen (DCCEEW, 2025c).

The Hydrogen Production Tax Incentive, a component of the Future Made in Australia policy package, will provide an incentive of AUD 2/kg of renewable hydrogen for up to 10 years of production for projects that reach a final investment decision by 2030. The AUD 4bn Hydrogen Headstart program, introduced in 2023, provides funding support to selected large-scale renewable hydrogen projects to cover the current gap between production cost and market prices (DCCEEW, 2024d).

Australia joined the Hydrogen Declaration at COP29, committing to scaling up “renewable, clean/zero-emission and low-carbon hydrogen production” and “accelerate decarbonisation of existing hydrogen production from unabated fossil fuels”, which leaves the door open for so-called “blue hydrogen” produced using fossil gas and CCS (DCCEEW, 2024k). As of February 2025, 15 pilot-scale hydrogen projects were operating in Australia with all except two producing renewable hydrogen (CSIRO, 2025).

Safeguard Mechanism

The Safeguard Mechanism (SGM) is the Australian government’s primary policy for reducing emissions from industrial facilities, excluding the power sector. It applies to large facilities emitting more than 100 ktCO₂e per year and sets emissions limits – or ‘baselines’ – which decline annually. The SGM was substantially reformed in 2023 to align with Australia's net zero target. Baselines will now decline by 4.9% each year until 2030, with future reductions post-2030 to be determined in five-year blocks (DCCEEW, 2024o).

The SGM’s design and implementation has yet to drive the scale of transformation needed to align with 1.5°C pathways. To comply with declining baselines, facilities can either cut their emissions, acquire Australian Carbon Credit Units (ACCUs), or purchase newly introduced Safeguard Mechanism Credits (SMCs). However, facilities have mostly met their obligations under the scheme by purchasing offsets, often criticised for lacking integrity, instead of cutting on-site emissions, which would deliver actual emissions reductions (see "Legally mandated use of offsets" in the "Forestry" section below). The reform allows for unlimited use of offsets to meet declining baselines.

The design of the SGM assumes significant new fossil fuel projects will come online, such as new carbon-intensive gas fields and coal mines (Clean Energy Regulator, 2023b; Department of Climate Change, 2023e; Reputex, 2023). The reform mandates new shale gas projects must have net zero scope 1 emissions, i.e. domestic emissions occurring during fossil gas production, and that new gas fields will be given a zero baseline for reservoir CO₂ (DCCEEW, 2024o). The effectiveness of the SGM depends on the extent to which existing and new facilities covered under the mechanism rely on offsets to meet their baselines. Without stricter constraints on offset use and clearer incentives for decarbonisation, the SGM risks falling short of delivering Australia’s climate goals.

In 2024, 215 facilities were covered by the SGM accounting for gross emissions of 135.8 MtCO₂e, which was approximately 26% of Australia’s total emissions excluding LULUCF (Climate Change Authority, 2024a; DCCEEW, 2025d). In 2023, SGM facilities surrendered 1.2 million ACCUs, meaning that SGM facilities collectively offset 1.2 MtCO₂e to meet their baselines in preference to making direct on-site emissions reductions.

The reformed SGM aims to reduce net SGM facility emissions from 138 MtCO₂e in 2022 to around 100 Mt in 2030. The government projects that gross emissions from SGM facilities will reduce from 136 MtCO₂e in 2025 to 121 MtCO^₂e in 2030 and that net emissions (i.e. accounting for offsets), would fall to 96 MtCO₂e in 2030 (DCCEEW, 2024b). Modelling undertaken for the government and the CCA found that 58–68% of compliance under the SGM could be met using ACCUs over the period to 2030 i.e. less than half of emission reductions are expected to come from the on-site emission abatement undermining the effectiveness of the mechanism (Climate Change Authority, 2024a). The CCA recommends that facilities be required to report on their expected share of onsite emissions reduction and carbon credit use. This heavy reliance on offsets demonstrates that offsetting undermines the mechanism’s effectiveness and delays the structural change needed across key high-emitting sectors, including mining, oil and gas, and heavy industry. The speed at with these sectors decarbonise is not at all sufficient to meet the net zero target in 2050. Purchasing offsets does not prepare the for decarbonisation.

Transport emissions represented 19% of Australia’s total emissions (excluding LULUCF) in 2024 (DCCEEW, 2024b). The sector is projected to become the greatest source of emissions by 2030 as power sector emissions decline (DCCEEW, 2024b).

The government introduced the long-awaited New Vehicle Efficiency Standard (NVES) in 2024, which applies to new cars sold from 2025 onward. Until this year, Australia was one of the last developed countries, along with Russia, to lack such standards. On average, as of the end of 2023, new cars in Australia consume 40% more fuel than those in the EU and 20% more than in the US (DCCEEW, 2023c).

Under the NVES, emissions intensity limits (g CO₂/km) are imposed on suppliers across the fleet of new vehicles they sell each year, with higher limits allowed for heavier vehicles. There are no restrictions on which cars may be sold, but the sale of emissions-intensive cars must be offset by the sale of more fuel-efficient vehicles or buying credits from other suppliers (DITRDCA, 2024). The emissions intensity targets are set to decline each year leading to a projected reduction in transport emissions by 4% between 2023 and 2030, and a further 15% between 2030 and 2035. The government’s impact assessment indicates that this would reduce cumulative emissions from passenger cars and commercial vehicles by around 16 MtCO₂e for the period 2025–2030 or about 11% below 2025 emissions levels by 2030 (DITRDCA, 2024).

During the legislation’s consultation period in early 2024, the government watered down the proposed standard, allowing some four-wheel drives to be counted as light commercial vehicles (LCVs) instead of passenger vehicles (PVs), with the former being subject to higher CO₂ limits. The government also raised the ‘headline target’ for LCVs, which effectively increases the average emissions intensity allowed for LCVs, and increased ‘breakpoints’ for both LCVs and PVs, which gives heavier vehicles greater emissions headroom. Combined, these changes will allow an additional 17 MtCO₂e to be emitted cumulatively by 2035 — one-sixth of the sector’s current annual emissions (DITRDCA, 2024). Australia has also not set a phase out date for fossil fuel vehicles.

The government’s current policies do little to address emissions from heavy-duty vehicles, such as trucks which account for more than a fifth of transport emissions (DCCEEW, 2024b), nor do they address the lack of planning for public transportation and modal shifting.

Electric vehicles

Australia’s electric vehicle (EV) uptake remains slow compared to other countries. Data from Australia’s Electric Vehicle Council show EVs (battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) made up only 8.5% of new car sales in 2023 growing to 9.65% in 2024, including (Electric Vehicle Council, 2024). The IEA uses a different methodology to account for share of new vehicle sale but this shows Australia lagging. comparatively, the market share of EVs (BEVs and PHEVs)in 2024 was 21% in the European Union, 48% in China, and 92% in Norway and 17% in Canada 2023 (IEA, 2024a).

The National Electric Vehicle Strategy, published in 2023, outlines a roadmap to encourage EV adoption with a focus on cooperation between the government and states. However, it does not include quantified targets for EV adoption beyond state-level targets that now exist for all states and territories, with varying levels of ambition, except the Northern Territory and Tasmania (DCCEEW, 2023c; IEA, 2023a; DCCEEW, 2024i).

The government has committed to building a National EV Charging Network, with charging stations located on average, every 150 kilometres along the country's major highways by 2026 (DCCEEW, 2024i). However, growth of the fast-charging network is not keeping pace with BEV sales with the number of BEVs per fast charging station rising year-on-year since 2021, which could limit BEV uptake if not addressed (Climate Change Authority, 2024a).

In 2023, the government projected that battery EV sales would reach 23% of new light-duty vehicle sales by 2030, and 47% by 2035 (DCCEEW, 2023b). The slow electrification of Australia’s vehicle fleet represents a missed opportunity to align the decarbonisation of the transport sector with the broader transition of the power sector.

The buildings sector accounted for 20% of Australia’s total final energy consumption, and 3% of total emissions excluding LULUCF in 2023 (DCCEEW, 2024a, 2024b). Emissions from the sector are expected to decline by 8% by 2030 and 14% by 2035 below 2024 levels.

Energy efficiency measures in buildings and appliances are essential to decarbonise. The IEA notes that while there has been progress in energy efficiency for commercial buildings, the residential sector is still lagging (IEA, 2023b). Jurisdictions have not fully implemented the latest 2022 National Construction Code (Climate Change Authority, 2024b). The Energy Savings Package, announced in the 2023/24 federal budget, allocates AUD 1.7bn to improve energy efficiency and help households and businesses save on energy costs, including energy efficient renovations and energy efficiency improvements for social housing (DCCEEW, 2024l).

Fossil gas accounted for 30% of final energy consumption in residential buildings in 2023, and 16% in commercial buildings (DCCEEW, 2024a). The government refused a call from the Climate Change Authority in 2023 to phase out new and existing gas connections for residential and small commercial buildings (Climate Change Authority, 2023).

Agriculture accounted for 16% of Australia’s total emissions excluding LULUCF in 2024 (DCCEEW, 2024b). Emissions from the sector are expected to remain stable until 2040 (DCCEEW, 2024b).

Emissions in the agriculture sector are mainly derived from enteric fermentation (digestive processes of animals), which accounted for 73% of the sector’s emissions in 2024 (DCCEEW, 2024b). Emissions from beef account for over half of agricultural emissions at 57% in 2024. This share is expected to remain steady out to 2040 (DCCEEW, 2024b). Application from lime, urea and fertilisers are other sources of emissions from the sector.

The government has allocated an additional AUD 30.8m to the Carbon Farming Outreach Program, aimed at supporting farmers and land managers to reduce emissions and store carbon (DCCEEW, 2024g). At COP28, Australia signed the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action to foster adaptation and resilience in the sector (COP28, 2023).

The LULUCF sector is a net sink, sequestrating 88 MtCO₂e in 2024 (DCCEEW, 2024b). In 2005, the baseline year for Australia’s NDC target, the LULUCF sector was a net source of emissions, contributing to 12% of Australia’s total emissions for that year. It became a net sink in 2015. Australia’s progress towards its 2030 climate target relies heavily on its LULUCF sinks, raising concerns that accounting methods, rather than actual emissions reductions, are driving reported progress (Hare, 2024).

The government regularly recalculates LULUCF data. In its December 2023 quarterly inventory report, released in May 2024, it increased historical LULUCF sequestration for 2021–2023 by 25 MtCO₂e. This included revising the 2023 estimates up from 63 MtCO₂e to 88 MtCO₂e, thereby reducing reported total emissions including LULUCF by 6% that year (DCCEEW, 2024m, 2024n). This change was attributed to “enhanced methods for estimating emissions from cropland and grassland” (DCCEEW, 2024m).

The government had also made significant revisions to LULUCF estimates in 2023, increasing historical LULUCF sequestration by 24 MtCO₂e for years 2021 and 2022 (DCCEEW, 2023d, 2023e). This recalculation was attributed to new spatial data used to model historical tree growth following the degradation in orbit of a satellite from which data was previously taken (DCCEEW, 2023d).

The government’s recalculations also extended to projected sequestration estimates. The government increased its projections for LULUCF sequestration in 2030 by 24 MtCO₂e between its 2022 and 2023 projections, and by 17 MtCO₂e between its 2021 and 2022 projections (DCCEEW, 2022b, 2023b; DISER, 2021). The changes in the 2022 projections were attributed to updated land clearing estimates, while the changes in the 2023 projections were attributed to “the impact of updated state policies around native forest harvesting, and other updates including higher estimates of ACCU supply” (DCCEEW, 2023b).

The successive recalculations of historical and forecasted LULUCF emissions highlight how uncertain estimates from this sector are. They also greatly impact Australia’s progress towards its 2030 emissions reduction commitments. The successive revisions to historical and projected LULUCF emissions have made the NDC target progressively easier to reach in terms of emissions reductions in the energy, industry, agriculture and waste sectors.

In 2022, when the Albanese government submitted its updated NDC to reduce total emissions including LULUCF by 43% below 2005 levels by 2030, this would have required a reduction in total emissions excluding LULUCF, i.e. from the energy, industry, agriculture and waste sectors of 29%. Now in 2024, following substantial LULUCF revisions, the same 43% target translates to a reduction in total emissions excluding LULUCF of just 23% below 2005 levels by 2030.

Legally mandated use of offsets

Australian Carbon Credit Units (ACCUs) are tradeable financial instruments theoretically corresponding to one tonne of CO₂ equivalent emissions “that would have otherwise been released into the atmosphere” (Australian Government - Clean Energy Regulator, 2024). ACCUs are generated from eligible projects that supposedly should either avoid or store emissions.

The Safeguard Mechanism is expected to be the main driver of ACCU demand, as large industrial emitters can meet their steadily declining emissions targets, or ‘baselines’, through offsets in lieu of cutting on‑site emissions Demand for ACCUs linked to the SGM is expected to surge from under one million in 2023 to 25 million by 2030, while annual ACCU issuance is projected to increase from 19 million in 2024 to 25 million in 2030 and 32 million in 2040 (DCCEEW, 2024b).

Despite being a central component of Australia’s current climate policy framework, mounting scientific evidence raises serious doubts about the environmental integrity of ACCUs (Andrew Macintosh, 2022; Macintosh, Butler, Ansell, et al., 2022; Macintosh, Butler, et al., 2024; Macintosh et al., 2023; Macintosh, Evans, et al., 2024; The Australia Institute, 2021). Several studies have found that many associated projects do not result in actual abatement. This is because they are crediting, for example, avoided deforestation that was never going to happen, human-induced regeneration projects that actually oversaw a decline in forest cover, or initiatives to generate electricity waste-related methane that were already economic (Macintosh, Butler, Evans, et al., 2022; The Australia Institute, 2021). The lack of integrity of these offsets undermines the market’s credibility.

Non‑additionality in land projects

Two-thirds of the ACCUs issued to date are linked to eligible projects that store carbon in the land sector, and the majority of ACCUs to be issued until 2035 are expected to be generated from eligible projects relying on the LULUCF sector, and hence in offsetting emissions under the SGM.

Yet, there is very limited evidence that Australian human-induced native forest regeneration (HIR) carbon offset projects led to increased woody vegetation cover in the credited areas – beyond what would have occurred naturally. Changes in forest and sparse woody cover within the project areas largely mirrored trends in adjacent comparison areas, indicating that these changes were likely due to factors other than the project activities, such as rainfall variability (Macintosh, Butler, et al., 2024; Macintosh, Evans, et al., 2024). This suggests that a significant portion of the credited carbon abatement from these projects may be non-additional, raising concerns about their environmental integrity and effectiveness as a climate policy instrument (Macintosh, Butler, et al., 2024). Findings contrast sharply with recent Australian government reviews that have largely endorsed the HIR method and its administration, raising serious concerns about the environmental integrity and effectiveness of HIR projects as a climate policy instrument, highlighting the gap between regulatory requirements and on-the-ground outcomes (Macintosh, Evans, et al., 2024).

This mounting scientific evidence undermines claims that the land-based ACCUs system in Australia reflects real additional stored carbon on land. In other words, the majority of projects examined have credited abatement that is non-existent, non-additional and potentially impermanent.

These detailed studies of the Australian ACCU system reinforce the scientific case that the use of carbon offsets with carbon storage on land by, for example, tree planting, to compensate for fossil CO₂ emissions is flawed (Climate Analytics., 2022). The current ability of ecosystems to absorb carbon mainly reflects the previous reduction in carbon caused by historical land use.

The waste sector accounted for 3% of total emissions excluding LULUCF in 2024 (DCCEEW, 2024b). Emissions from the sector are expected to fall 5% by 2030 and 10% by 2040 below 2024 levels (DCCEEW, 2024b). These emissions primarily stem from methane released by landfills, wastewater treatment, waste incineration and treatment of solid waste processing.

The 2024 National Waste Policy Action Plan does not set an emissions reduction target for this sector. It includes the following targets (DCCEEW, 2024j):

• Reducing total waste generated in Australia by 10% per person by 2030.
• Achieving an 80% average resource recovery rate from all waste streams by 2030.
• Halving the amount of organic waste sent to landfill for disposal by 2030.

While these goals may contribute to emissions reductions, they are not part of a coordinated strategy to decarbonise the waste sector, nor are they integrated into Australia’s broader emissions reduction framework.

Methane accounted for close to 20% of Australia’s greenhouse gas emissions in 2024 (DCCEEW, 2024b). Australia joined the Global Methane Pledge in 2022, committing to reduce global methane emissions across all sectors by at least 30% below 2020 levels by 2030. Despite this, Australia’s total methane emissions including from LULUCF are projected to fall to just 1% below 2024 levels by 2030 (DCCEEW, 2025a).

Methane emissions mostly come from agriculture (53% in 2024) and fossil fuel fugitives (24% in 2024) (DCCEEW, 2025a). Methane emissions from agriculture are projected to remain at around current levels.

Fugitive emissions from fossil fuels – released during production, processing, transportation and storage – accounted for 9% of total emissions excluding LULUCF in 2024 (DCCEEW, 2024b). Over half (55%) of these fugitives emission came from coal mining, while oil and fossil gas production contributed the remaining 45% (DCCEEW, 2024b).

Fugitives from coal mining are mostly methane (92% in 2024) whereas fugitives from oil and fossil gas have a smaller proportion of methane (37% in 2024) (DCCEEW, 2025a). This is because fugitive emissions from the oil and fossil gas sector also include a significant share of vented CO₂ and emissions from flaring, which is mostly CO₂. Fugitive methane emissions from fossil fuels are expected to rise by 3% between 2024 and 2030 (DCCEEW, 2025a).

Underreporting of methane emissions potentially obscures their true scale and masks the need for mitigation. Despite efforts for improving monitoring, like the 2021 reassessment of emissions from coal mines in Queensland following analysis of satellite data, the IEA has estimated that methane emissions from Australian coal mines are underreported by as much as two-thirds (Department of Industry, 2021; Ember, 2022; IEA, 2022; Sadavarte et al., 2021). Another study indicates that when using airborne measurements methane emissions from a large Australian open-cut coal mine were significantly higher (3–8 times) than the operator-reported emissions (University of Bremen, 2025).