Cleaner industries could be forced to dig deeper when it comes to reducing emissions to allow a bigger share of the carbon budget for coal and gas.
Australian raw mineral exports are powering the global energy transition with lithium production at a record high, according to a report issued on Monday, as the sector looks to start onshore refining.
The Australia's Identified Mineral Resources report also confirms the nation's status as the world leader in the production of five important commodities - bauxite, iron ore, lithium, rutile and zircon.
Meanwhile new industries in the lithium battery supply chain as well as green steel, aluminium, green hydrogen and fertilisers could suffer under federal Labor's proposed emissions safeguard mechanism, modelling by research house Reputex has found.
Greenhouse gas emissions from oil, coal and gas projects are already projected to make up around half of emissions covered under the scheme.
Even if a small number of new fossil fuel projects proceed, they will eat a growing share of the carbon budget, making the task of cutting overall emissions more onerous, according to Reputex's research for the Australian Conservation Foundation (ACF) and independent Climate Council.
"Worse, if the production of coal and gas is even a little higher than the government has predicted, this risks blowing the carbon budget entirely," Climate Council spokeswoman Dr Jennifer Rayner said.
But Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch told AAP the industry shares the commitment of net zero across the economy by 2050 and is consulting with the federal government over the mechanism.
Gas plays a crucial role in replacing coal, backing up renewable energy, producing low-carbon hydrogen and powering industries including the processing of critical minerals necessary for net zero, she said.
The draft bill before parliament calls for annual emissions cuts of 4.9 per cent for the 215 industrial facilities governed by the scheme.
Should liquefied natural gas and coal production be higher than forecast, decline rates of up to 8.9 per cent may be needed, Reputex found.
But if higher emissions are identified at an earlier stage, increased action could be taken more quickly, providing companies and governments with a longer lead time to prepare for increased decline rates later in the decade.
ACF and the Climate Council say this could be done by adding in regular reporting to track annual progress against the emissions budget.
They also want the carbon budget to be a hard limit in law, along with rigorous environmental assessments for any new projects or expansions.
Carbon Market Institute spokesman Kurt Winter told AAP the Reputex report was a reminder to get the treatment of new industry entrants right, closely monitor the carbon budget, and bring forward a proposed review.
Reputex said the 16 new coal and gas projects in the pipeline, including Woodside's Scarborough, cover one-quarter of emissions reductions the mechanism aims to achieve this decade.
Three LNG projects - WA's Pluto, Barossa off the NT coast, and Browse in the North West Shelf - would account for more than two-thirds of annual emissions from new facilities, according to the modelling.
The Climate Council and ACF are calling for the emissions safeguard mechanism to be harder on new entrants to avoid a blowout in emissions.
ACF spokesman Gavan McFadzean said a "huge flaw" is that the mechanism doesn't distinguish between essential future industries and highly polluting coal and gas that should be phased out.
