New South Wales (NSW) is accelerating its clean energy transition with major investments in renewable energy, battery storage, transmission infrastructure, and grid modernization to achieve its legally binding net zero emissions targets. However, a new analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) argues that the state’s coal mine approval framework continues to rely on outdated economic assessment guidelines introduced in 2018, significantly understating the financial impact of greenhouse gas (GHG) emissions from coal projects.
NSW Coal Assessment Framework Faces Growing Climate Policy Gap
According to IEEFA, NSW’s energy policy now presents two contrasting directions. While the state is rapidly expanding renewable electricity capacity and modernizing its power system, coal expansion projects continue to be evaluated using methodologies that only account for Scope 1 emissions from on-site operations and Scope 2 emissions from purchased electricity.
The framework excludes Scope 3 emissions generated when exported coal is transported and burned overseas, despite these representing the largest share of lifecycle emissions. In addition, project developers are permitted to multiply total emissions by NSW’s share of the global population—between just 0.11 percent and 0.33 percent—when calculating climate costs in Cost-Benefit Analyses, substantially reducing the carbon liability assigned to mining projects.
IEEFA Lead Analyst Jonathan Teubner says updating the methodology would improve transparency and better align investment decisions with NSW’s long-term climate commitments.
Hunter Valley Operations Shows Massive Carbon Cost Difference
IEEFA used the Hunter Valley Operations (HVO) Continuation Project to illustrate how current assessment rules influence project economics.
The project is expected to generate around 15.31 million tonnes of combined Scope 1 and Scope 2 emissions. However, after applying the population allocation methodology, only approximately 51,000 tonnes are included in the official Cost-Benefit Analysis.
Using the existing methodology, the estimated emissions cost is only about AUD 3.8 million.
When NSW Treasury’s Target-Consistent carbon pricing framework is applied instead, IEEFA estimates the emissions cost exceeds AUD 2.2 billion, representing an underestimation of more than 580 times.
The report further estimates that alternative carbon pricing assumptions could increase total emissions costs to approximately AUD 5.64 billion, reducing the project’s reported Net Present Value (NPV) benefit of AUD 5.71 billion by around 98.7 percent.
Moolarben Mine Expansion Reveals Similar Underestimation
The proposed Moolarben Mine Expansion produces approximately 530,000 tonnes of Scope 1 and Scope 2 emissions.
Following the current population adjustment methodology, only around 1,000 tonnes are included in the project’s economic assessment.
This results in an estimated emissions cost of approximately AUD 30,000 using Australian Carbon Credit Unit pricing.
Applying NSW Treasury’s valuation approach instead increases the estimated emissions cost to roughly AUD 77 million, highlighting another significant gap between existing approval methods and modern carbon pricing.
Coal Continues Delivering Billions to NSW Economy
Despite the carbon accounting concerns, coal remains a significant contributor to the NSW economy.
The Hunter Valley Operations continuation project forecasts approximately AUD 19.7 billion in lifetime revenue, AUD 2.9 billion in before-tax profits, and AUD 2.8 billion in capital expenditure.
The project also expects to generate more than AUD 1 billion annually through regional supplier spending.
For the NSW Government, lifetime royalty payments are estimated at approximately AUD 5.22 billion, equivalent to around AUD 1.6 billion in Net Present Value.
Mining companies maintain that brownfield expansions are essential to support export demand, sustain regional employment, and maintain government revenues during Australia’s transition toward lower-carbon industries.
Net Zero Targets Increase Pressure on Coal Expansion Policy
NSW’s Coal Industry 2026–2050 Statement prohibits approvals for entirely new greenfield coal mines while allowing brownfield expansions adjacent to existing mining operations.
The policy seeks to maintain metallurgical coal exports, meet international supply commitments, and protect around 8,000 regional mining jobs.
To support regional communities, the NSW Government has established the Future Jobs and Investment Authority backed by a AUD 50 million transition package focused on land rehabilitation and economic diversification.
At the same time, the Climate Change (Net Zero Future) Act 2023 legally requires emissions reductions of at least 50 percent by 2030, 70 percent by 2035, and net zero by 2050, all measured against 2005 emission levels.
The independent Net Zero Commission reports that statewide emissions declined only 27 percent between 2005 and 2022, warning that current trends place both the 2030 and 2035 targets at increasing risk.
Former NSW Court of Appeal Judge John Basten has also concluded that excluding downstream Scope 3 emissions from environmental assessments is difficult to reconcile with NSW’s climate legislation because other sectors would ultimately need to achieve deeper emissions reductions within a fixed emissions budget.
NSW Treasury Uses Much Higher Carbon Prices
IEEFA notes that while mining approvals continue using older methodologies, NSW Treasury has already adopted substantially higher shadow carbon prices across government investment decisions.
Under the Treasury’s Target-Consistent Approach, carbon prices range between AUD 66 and AUD 130 per tonne in FY2025.
The projected range increases to AUD 148–AUD 164 per tonne by FY2030, rises further to AUD 234–AUD 334 per tonne by FY2035, and reaches AUD 350–AUD 377 per tonne by FY2050.
IEEFA argues that applying these values consistently to mining project assessments would provide a more realistic estimate of long-term climate-related financial risks.
NSW Renewable Energy Expansion Accelerates
Alongside the debate over coal approvals, NSW continues making rapid progress in renewable energy deployment.
The state aims to develop 16 GW of renewable generation capacity by 2030 and has already approved approximately 13.76 GW, exceeding 75 percent of its interim target.
Renewable energy now supplies approximately 36 percent of NSW’s annual electricity demand.
Across Australia’s National Electricity Market, renewable generation exceeded 50 percent of average electricity supply for the first time, reaching 51 percent, while renewable penetration in NSW exceeded 80 percent during periods of peak summer electricity demand.
The state’s solar industry also produced more than 1 terawatt-hour of electricity during December 2025, establishing a new monthly generation record.
Battery Storage and Grid Investments Gather Pace
Energy storage investment continues expanding across NSW.
The state has increased its long-term storage target from 40 GWh to 56 GWh and has approved approximately 18.91 GW of battery energy storage systems together with 2 GW of long-duration storage projects since 2019.
Planning reforms are also accelerating project development. The Prioritising Renewable Energy Bill, enacted in May 2026, grants greater authority to fast-track strategically important renewable projects.
These reforms have reduced planning assessment times by 24 percent while increasing renewable energy approvals by 50 percent.
Federal support through the Capacity Investment Scheme has also strengthened investment momentum. Tender 7 secured 7.8 GW of renewable generation together with 7.9 GWh of battery storage across 19 projects, unlocking approximately AUD 17 billion in private investment.
Meanwhile, the state-owned Energy Security Corporation has committed its first AUD 100 million investment to develop a 650 MW battery platform across Sydney, Newcastle, and the Hunter region, with the initial 500 MW phase expected to commence operations in early 2029.
Transmission Network Expansion Supports Renewable Growth
Transmission infrastructure is expanding alongside renewable generation.
EnergyCo is progressing the New England Renewable Energy Zone, including a 290-kilometer, 500-kilovolt transmission corridor capable of connecting up to 6 GW of renewable generation to the NSW electricity grid by 2034.
The combination of renewable generation, battery storage, transmission investment, and faster project approvals is strengthening NSW’s pathway toward a lower-carbon electricity system.
Outlook
NSW’s energy transition highlights a significant policy contrast. The state is rapidly expanding renewable energy capacity, battery storage, transmission infrastructure, and supportive clean energy policies while simultaneously evaluating coal expansion proposals using carbon accounting methodologies that IEEFA says no longer reflect current climate policy or Treasury valuation standards. Updating mining assessment frameworks to incorporate modern carbon pricing and more comprehensive emissions accounting could improve investment transparency and better align future project approvals with NSW’s legally binding net zero commitments.
SHAFANA FAZAL