IN FOCUS: Coal mine methane emissions reform – Implications for the Safeguard Mechanism market

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,