Coal sector demand skews carbon credits market

IEEFA warns that Australia’s coal mining sector is relying on carbon credits to comply with declining Safeguard Mechanism baselines, while onsite methane abatement and diesel decarbonisation remain limited. Sixty-eight coal mines are covered by the mechanism, and rising production could keep sector emissions elevated into the 2030s. Because Australia’s ACCU market is dominated by land-based carbon sequestration projects, while credits from methane-reduction projects are declining, mines may increasingly purchase units that compensate for carbon dioxide without directly addressing their methane emissions. IEEFA argues this demand could distort the wider carbon market, crowd out other buyers and shift responsibility for emissions reductions to other sectors. It urges policymakers to address coal-sector reliance on offsets during the government’s 2026–27 Safeguard Mechanism review.
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