Australia: Climate Mitigation & Economic Development

Climate mitigation can support, rather than hinder, Australia’s long-term economic development if policies are more tightly integrated.

Australia faces a clear policy tension between investing in climate mitigation and economic development. On the one hand, climate policy seeks accelerated reductions in emissions, the deployment of clean energy, and a transition away from fossil fuel dependence. On the other hand, Australia’s economy has been historically anchored in resource extraction (coal, gas, minerals), agriculture, and export-oriented industries that remain carbon-intensive.

Economically, climate mitigation requires substantial public and private investment in renewable energy infrastructure, grid upgrades, electrification of transport and industry, and new technologies (e.g., hydrogen, carbon capture) – all of which carry upfront costs and transitional socioeconomic impacts, with an estimate of ~$400 billion in new capital investment to achieve targets. Conversely, traditional sectors argue that rapid climate action can raise costs for industries and communities reliant on fossil fuel incomes or energy availability.

Economic Development Priorities

Australia’s core economic development priorities include:

Maintaining strong export performance in minerals, energy, and agriculture
Supporting energy security and affordability
Developing new growth sectors such as critical minerals, clean energy, hydrogen, and advanced manufacturing
Attracting foreign investment and strengthening regional economies

Policies Supporting These Priorities

To pursue these economic goals, Australia has adopted a combination of climate and industry policies, including a net-zero by 2050 target, a 43% emissions reduction target by 2030, sector-based emissions-reduction plans, and reforms to the Safeguard Mechanism for large emitters.

Central to this approach is the Future Made in Australia plan, which aims to position Australia as a global supplier of clean energy, green metals, and low-emissions industrial products. The policy is designed to strengthen domestic manufacturing and supply chains while capitalising on the global transition to net zero. The government has argued that this strategy could create up to 400,000 jobs by 2040 and contribute almost $1 trillion to the Australian economy by 2060, linking climate action directly to long-term economic growth and competitiveness.

Public investment in renewable energy, transmission infrastructure, and clean industry under programs such as Powering Australia is intended to support these objectives and attract private capital.

Impacts on Climate Mitigation

While many economic development policies support emissions reduction, others constrain ambition. Continued approval of coal and gas projects and reliance on fossil fuel exports risk locking in future emissions and undermining alignment with a 1.5°C pathway. In 2025, Hunter Valley Operations coal mine received an extension for at least 18 months, and Australia’s largest gas Development, Woodside’s North West Shelf gas project, received final approval to extend operations through to 2070.

Whilst these decisions protect local economies and jobs in the short-term. They also demonstrate Australia’s ongoing approval of fossil fuel infrastructure even as it pursues emissions-reduction policies, potentially locking in emissions and making it more difficult to align with the IPCC’s 1.5 degrees pathway, due to the long operational lifespans of coal and gas assets.

Bridging Economic and Climate Policy Barriers

There are opportunities to align climate mitigation with economic development better, including:

Industrial decarbonisation hubs that protect jobs while reducing emissions in heavy industry. For example, Gladstone, Queensland, is a low-emissions industrial hub.
Clean energy export strategies focused on green hydrogen and low-emissions metals to replace fossil fuel export revenues, through the Future Made in Australia policy.
Streamlined planning and approvals for renewable energy and transmission infrastructure to accelerate deployment and lower long-term energy costs. For example, states like NSW and Victoria have established Renewable Energy Zones.

Together, these approaches demonstrate that climate mitigation can support, rather than hinder, Australia’s long-term economic development if policies are more tightly integrated.

This Post was submitted by Climate Scorecard Australia Country Manager, Jessica Gregory.

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