Loophole lets coal and gas mines expand without stricter climate laws, Climate Council warns

Safeguard Mechanism review expected next year as environmental group calls for 'best-practice' limits on all new emissions

By LineZotpaper

Published13 October 2026

Read Time3 min

Sources2 outlets

The Climate Council has warned that coal and gas mines are exploiting a loophole in Australia's Safeguard Mechanism to expand operations and add emissions without facing the stricter pollution limits applied to new projects, urging the government to close the gap ahead of a scheduled review next year.

Australia's biggest polluters are using a legal distinction between new facilities and expansions to avoid the toughest emissions limits, according to the Climate Council. The environmental group says unless mine expansions are treated the same as new mines, an additional 4.5 million tonnes of CO2 a year will be released by 2035.

Coal and gas mines are among roughly 200 facilities covered by the Safeguard Mechanism, which requires Australia's largest emitters to cut or offset emissions by about 5 per cent a year or face penalties. Under the current law, new coal and gas facilities must meet stricter "best-practice" limits based on the most efficient available technologies. Existing facilities are not required to meet that standard when they expand or extend the life of a mine.

Modelling by Reputex estimates that across 22 planned coal and gas expansions and extensions over the next decade, projects treated as existing facilities will be able to emit 11 times more than if they were classified as new facilities.

"Companies have an incentive to characterise everything as an expansion rather than a new facility," said Amanda McKenzie, chief executive of the Climate Council. "We're arguing that is one of the loopholes that needs to be shut."

The council says since the Safeguard Mechanism was amended in 2022, more than three quarters of new coal development has taken the form of expansions or extensions. It pointed to last month's approval of an open-cut coalmine in the Hunter Valley, owned by Yancoal and Glencore, which was extended by more than a decade. The life extension into the 2040s involves mining deeper coal seams, represents a $2.7 billion capital investment, and will add an extra 809 megatonnes of CO2 emissions, roughly two years of Australia's annual emissions. Because the mine was already covered by the Safeguard Mechanism, it was not required to meet the stricter limits applied to new facilities.

The Safeguard Mechanism is under review and due to be revisited next year, when the government will decide whether to set a steeper trajectory toward net zero by 2050. The Climate Council says "best-practice" CO2 limits should be applied to all new coal and gas emissions, whether from a new mine or an expansion. It notes that emissions from facilities covered by the mechanism actually increased in the most recent year.

Analysis

Why This Matters

If the loophole remains open, Australia's emissions could rise significantly as existing mines extend their lives, undermining progress toward net zero by 2050.
The decision will affect communities near mining regions such as the Hunter Valley, where expansions prolong economic dependence on fossil fuels and local environmental impacts.
The review next year is a key test of the government's climate commitments, with potential implications for international climate pledges.

Background

The Safeguard Mechanism was introduced by the Gillard government and strengthened under the current Labor government in 2022. It requires Australia's largest industrial emitters to reduce their emissions intensity or purchase offsets. The distinction between new facilities and existing facilities was intended to grandfather existing operations, but critics say it has created a perverse incentive for companies to frame new emissions as expansions. The mechanism covers mines, gas plants and other heavy industry, accounting for roughly 28 per cent of Australia's total emissions.

Key Perspectives

Climate Council: Argues the expansion loophole must be closed to ensure all new emissions face the same best-practice limits. It warns that without change, emissions from expansions will far exceed those from new mines. Coal and gas industry: Companies such as Yancoal and Glencore benefit from the existing rules, which allow them to extend mine lives without facing steeper compliance costs. Industry groups typically argue that expansions provide certainty for investment and jobs. Australian Government (Labor): Faces pressure from environmental groups to tighten the rules during the upcoming review, while balancing energy security and economic interests. The government has not publicly indicated its position on closing the loophole.

What to Watch

The timing and outcome of the Safeguard Mechanism review next year, including any proposed amendments to the definition of new versus existing facilities.
Emissions data for the next reporting year to see whether the trend of rising emissions from covered facilities continues.
Decisions on other major coal and gas expansions currently in the pipeline, particularly in New South Wales and Queensland.

Sources

Loophole allowing new coal and gas to avoid stricter climate laws — Just In
Loophole allowing new coal and gas to avoid stricter climate laws — Latest business news