Multiple independent studies have estimated Australia’s coal mine methane emissions to be significantly higher than reported, with the IEA estimating that Australia could be under-reporting coal mine methane emissions by around 90%, while other peer-reviewed studies estimate coal mine methane emissions could be 59-122% higher than reported, with open-cut mines the main source of “missing” emissions.
In response to concern over the under-reporting of coal mine methane emissions, the federal government has implemented improvements to phase out the use of “Method 1” (state-based industry average) reporting for the estimation of coal mine methane emissions from open-cut coal mining. From 1 July 2025, companies covered by the Safeguard Mechanism will transition to a “Method 2” (site-specific) measurement methodology – which will also be reviewed due to similar integrity concerns around reported emissions.
We estimate that the transition to site-specific reporting will temporarily decrease total reported coal mine methane emissions under the Safeguard Mechanism, before the tightening of the Method 2 framework triggers a significant increase in covered emissions of up to 22 Mt p.a. – representing 16% of FY23 reported covered emissions.
As we noted in our latest quarterly CMO, we believe that the Australian carbon market is finely balanced, and is increasingly vulnerable to supply- and demand-side sensitivities.
Changes to coal mine methane reporting, and the potential for a large volume of emissions be added to the Safeguard Mechanism, therefore carry a substantial risk for price development, which we explore in depth within this market briefing, with flow-on implications for SMC creation – and Australia’s emissions budget.
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