Mine sites will close if the industry doesn't have access to carbon credits to manage the early years of new emissions controls, the Minerals Council of Australia has warned.
Mining operations account for almost half of the industrial facilities covered by a safeguard mechanism that will be repurposed under proposed laws for deeper cuts to greenhouse gas emissions.
Carbon credits are a "must have" to manage during a difficult transition until replacement technology becomes available, MCA chief executive Tania Constable told a federal parliamentary inquiry.
Every facility will need to reduce its emissions - including new projects - under the mechanism, she said on Tuesday.
Set up under the coalition government, the scheme covers 215 industrial facilities with more than 100,000 tonnes of annual greenhouse gas emissions.
Ms Constable said every technology and energy source, including carbon capture and storage and nuclear energy, would need to be considered to get to net zero emissions by 2050.
"Nuclear energy is a very important net zero energy source and must be part of the broad energy sources used," she said.
"Any country that is currently leading the commitments has nuclear energy in their arsenal."
Ms Constable said there would be a gradual increase of electrification of mine sites and billions of dollars was already being invested.
Electric haulage will replace diesel trucks, new energy sources are being developed, and partnerships are under way on green steel to future-proof the iron ore-rich Pilbara region.
"Every industry needs to play its part and the mining industry is certainly playing it's part," Ms Constable said.
Asked by independent senator David Pocock about generous diesel tax breaks, Ms Constable said they were not a disincentive to moving to electric transport.
"We're already seeing the change out and hybrid models are already occurring," she said.
"The less diesel the better, because of the emissions associated with the use of diesel."
When questioned by Liberal senator Hollie Hughes if there would be job losses at mines if access to carbon credits was cut, Ms Constable said "potentially they would close".
Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said Labor must keep its pledge to protect trade-exposed sectors, including liquefied natural gas exports.
Ms McCulloch said the industry has already announced billions of dollars of investment in decarbonisation.
"It is imperative that Australia retains its competitive global position and that gas can continue to power Australia's and our region's economy in a cleaner energy future," she said.
Under the rejigged mechanism, overall emissions must reduce by 4.9 per cent per year through to 2030 by using cleaner production methods and carbon credits to offset pollution.
Taxpayer-funded safeguard credits would be issued to companies that achieve deeper cuts than required.
But critics told the inquiry that relying on unlimited carbon credits, some of them "junk", risks making climate change worse.
