NSW’s outdated guidelines skew assessment of coal mine approvals

Note: This analysis is for information and educational purposes only, and is not intended to be read as investment advice. Please click here to read our full disclaimer.
 

The New South Wales (NSW) government is using guidelines several years out of date to assess coal mine development applications, resulting in overstated economic benefits while downplaying emissions costs. 

Published in March 2026, the NSW Coal Industry 2026–50 Statement has effectively stopped development of new coal mines. However, it still allows the extension or expansion of existing mines, subject to existing approval processes. 

The processes apply an economic assessment framework that requires a calculation of a project’s net economic benefit to NSW based on a cost benefit analysis (CBA). These CBAs draw on the Technical Notes for the Guidelines for the Economic Assessment of Mining and Coal Seam Projects, which have not been updated since 2018. The guidelines include provisions that:

• Limit the CBA to Scope 1 and Scope 2 emissions.
• Limit the cost estimate for the impact of emissions to NSW only.
• Omit any defined methodology to value the emissions consistent with legislated targets. 

The use of such outdated guidelines ensures CBAs only factor in the costs for a very small proportion of total project emissions, resulting in a substantial undervaluation of emissions costs. This in turn means the economic benefits of coal projects are significantly overvalued.

Valuations only cover a minuscule proportion of emissions

Companies are interpreting the 2018 guidelines as allowing them to multiply their emissions by NSW’s share of global population to assess the associated cost. This approach is demonstrated in the current application and economic assessment for the Hunter Valley Operations (HVO) continuation project, as well as an application for expanded production at the Moolarben mine. In both cases, emissions costs are calculated by applying NSW’s share of global population to their total Scope 1 and 2 emissions.

Table 1: Discrepancy between Scope 1 and 2 emissions and emissions included in CBAs (thousands of tonnes, carbon dioxide-equivalent)

^{Note: This table demonstrates the substantial variance between the reported total Scope 1 and Scope 2 emissions created by the projects over their requested lives, and the volume of emissions that are effectively valued in the CBA under the 2018 guidelines.}

In addition, the 2018 approach is limited to the valuation of Scope 1 and Scope 2 emissions – those only directly related to of coal production. It explicitly excludes emissions associated with transporting coal on diesel-powered locomotives to the Port of Newcastle, and any emissions from the use of the coal, as these are considered Scope 3 emissions. 

Those emissions were indeed excluded from both applications mentioned above. Inclusion of total Scope 3 emissions (reflecting the use of coal in overseas power generation) would greatly increase the cost of emissions. 

A 2025 ruling by the NSW Court of Appeal set a precedent that any Independent Planning Commission assessment should include the impact of all Scope 3 emissions on NSW. The High Court of Australia heard an appeal to this ruling on 13 May 2026 but has not yet given its verdict. Given this pending decision, IEEFA has not included all Scope 3 emissions in its conclusions, though a recent analysis by the Hon John Basten KC highlights that the policies and guidelines used in the NSW coal mine approval process are out of date. 

NSW Treasury guide brings focus on emissions targets 

In February 2023 the NSW Treasury published the NSW Government Guide to Cost-Benefit Analysis, which was updated in April 2025. The guide states that the cost of carbon emissions that occur in NSW are as a mandatory requirement in CBAs. The valuation methodology is defined in Carbon emissions in the Investment Framework (TPG24-23), which outlines the methodology for valuing emissions in CBAs, including:

• The scope of emissions to be considered.
• When carbon emissions need to be included.
• What carbon values to use (including for sensitivity analysis).

The document is clear that valuations reflect the cost to mitigate emissions consistent with the trajectory required to meet NSW’s legislated targets. This is at odds with the approach taken in the 2018 guidelines.

Emissions costs are misaligned to cost to meet NSW targets

Under the 2018 guidelines, the cost of emissions is the product of the total emissions and their assessed value. The guidelines provide no guidance on a specific valuation approach. This ensures the value used is not necessarily related to the cost of meeting legislated NSW targets. For example, HVO uses the US Environmental Protection Agency (EPA)’s “social cost of carbon” metric, while Moolarben uses the traded cost of Australian Carbon Credit Units (ACCUs).

The EPA and ACCU values differ significantly from the cost required to meet NSW emission targets, which are calculated using the accepted methodology of adopting cost trajectories based on abatement costs. Figure 1 compares the effective emission costs for HVO and Moolarben to that assessed by the NSW Treasury as required to meet NSW’s legislated targets, highlighting this differential.

Figure 1: Comparison of effective emission costs (AU$/tonne)

^{Source: IEEFA analysis of HVO application, Moolarben application, and TPG24-34 Carbon emissions in the Investment Framework from NSW Treasury (discounted at 7% based on HVO emissions profile).}

Correcting underreporting could offset all economic benefits

The natural result of applying costs independent from NSW targets to a reduced scope of emissions, and then further reducing them by NSW’s proportion of global population, is a substantial undervaluation of the costs of emissions.

The HVO submission assesses the cost of over 15 million tonnes (Mt) of total project emissions at a mere $3.8 million. By using the full reported Scope 1 and 2 emissions and the NSW Treasury cost of carbon, IEEFA assessed that the corrected cost of emissions would be in excess of $2.2 billion – about 580 times more than reported.

Moolarben is significantly less emissive than HVO, with reported emissions rising by about 0.5Mt to 2034 (the requested life of the project). Once reduced by NSW’s share of global population, these emissions are valued at an ACCU cost stated to be $30,000. The Moolarben application acknowledges that fully costing the emissions via the NSW Treasury methodology would cost $77 million, reflecting the cost minimisation impact of application of the 2018 guidelines. 

It should also be further noted that the NSW share of global population used is not consistent across the two projects, with Moolarben using 0.11% and HVO using 0.33%.

The differential in emission values caused by the combination of these two approaches is highlighted in Figure 2.

Figure 2: Comparison of reported emissions cost with corrected cost (AU$ million)

In a recent assessment of the HVO application, the NSW Department of Planning, Housing and Infrastructure (DPHI) accepted the calculated $3.8 million emissions costs for the project highlighting its consistency with the 2018 guidelines (compared to IEEFA’s calculation of $2.2 billion). The assessment accepts the calculation of net benefits to the state of NSW of $5.71 billion, which is greater than the assessed cost using NSW Treasury’s costs. However, alternative carbon cost scenarios are referenced in the analysis, one of which results in a total emissions cost of $5.64 billion, which virtually eliminates any net benefit of the project. 

Urgent update of guidelines is required

The 2018 guidelines are out of date and inconsistent with analytical approaches from other government organisations. Their use effectively eliminates the cost of emissions from the economic assessment of coal projects. They therefore greatly overstate the economic benefits of coal projects.

For the economic assessment of coal mines to be as rigorous as stated in the NSW Coal Framework, IEEFA recommends the NSW government immediately align its assessment methodology with its legislated targets. This can be achieved by updating the economic assessment guidelines to reflect NSW Treasury guidelines, requiring all emissions created in NSW to be valued at the state’s calculated emission abatement cost. 

An update to the guidelines is urgently needed. Overstating the benefits of coal mines by overlooking their emissions does little to support the NSW economy or its emissions reduction efforts.