Export demand, not policy, drives Australia’s coal phase-out, new analysis says
Climate Resource’s December 2025 report finds Australia’s coal exports could fall sharply by 2035 under climate-action scenarios, with the pace set by demand in overseas markets; it recommends a national coal phase-out roadmap, tailored plans for thermal and metallurgical coal, and targeted support for coal regions—issues of direct interest to NSW decision-makers.
Specialist Australian research company Climate Resource have released a new report that examines how global action to limit warming affects Australian coal. The December 2025 report is authored by Burdon, Talberg, Spiller, Lewis and Meinshausen.
It states: “The report reminds us that the change in demand in export markets will dictate the rate of phase-out of Australian coal production, rather than Australian government policy.” The authors assess scenarios consistent with peak warming around 1.6°C (“1.5°C with low overshoot”) and 1.8°C (“well-below 2°C”).
Under these scenarios, Australia’s thermal coal exports are projected to decline by 64–78% by 2035 in 1.8°C cases, and by 96–98% by 2035 in 1.6°C cases (all relative to 2024). Metallurgical coal shows a slower contraction: 28–54% by 2035 in 1.8°C cases, and 69–80% by 2035 in 1.6°C cases. The report assesses both a “high demand” case (Australia keeps its current market share) and a “low demand” case (key markets favour local supply).
Domestic use keeps falling
The analysis also projects a steep fall in Australian thermal coal demand at home. Relative to 2024, the report projects a 59% drop by 2030 and 86% by 2035 in 1.8°C scenarios, and a 76% drop by 2030 and 93% by 2035 in 1.6°C scenarios. The report notes these declines are consistent with AEMO’s Step Change pathway and indicate coal-fired power stations may retire earlier than planned due to cost pressures and competition from renewables.
Why this matters in NSW
NSW policy teams track export and domestic market shifts closely. The report’s conclusions are directly relevant to NSW because it assesses Australia’s exposure to changes in demand in key export markets (India, China, Japan, South Korea and Taiwan) and points to rapid declines in domestic thermal coal use. These are national-level findings with clear implications for state planning, including workforce and industry programs in coal regions.
What the analysis recommends
Climate Resource sets out a policy approach centred on planning and regional support. The report calls for a national coal phase-out roadmap that distinguishes between thermal and metallurgical coal and aligns with Paris targets. It recommends targeted transition plans and investment in clean industries for coal regions, and states that Australia should cease approval of new coal projects, consistent with international climate guidance. The authors also point to the value of strong implementation goals in international engagement.
The report frames these as risk-management steps to avoid impaired assets, regional economic shocks and missed clean-energy investment. As the authors write: “A proactive coal phase-out strategy is essential to manage economic risks associated with this changing demand for Australia’s exports, support regional transitions, and meet international climate goals.”
Scenarios and scope
The modelling draws on NGFS Phase 5 (2024) scenarios and presents median results with a 13th–87th percentile range. It distinguishes pathways that stabilise warming near 1.5°C by 2100 (with low overshoot) from those that temporarily exceed 1.5°C by a greater margin before declining. The report notes that projections carry uncertainty due to evolving policy, technology and market conditions, and that domestic outcomes depend on energy market trends, investor decisions and government policy.
