The harms and costs of the HVO coal extension far outweigh its benefits
Climate Integrity has made a submission to the NSW Independent Planning Commission on the HVO North and South Open Cut Coal Continuation Projects.
We raise four substantive concerns, each of which highlights climate-related risks demonstrating that the harms and costs of this project far outweigh any benefits claimed by the proponent. We have recommended that approval be refused on the grounds that the project is not in the public interest.
Key submission points
1. The projects would breach Australia's obligations under international law
Australia is a signatory to the UN Framework Convention on Climate Change and the treaties developed under it, including the Paris Agreement which requires parties to make best efforts to limit global warming to well below 2°C, and to pursue efforts to limit the increase to 1.5°C.
In July 2025, the International Court of Justice published its advisory opinion on the Obligations of States in respect of Climate Change, authored by 15 members of the Court and representing their unanimous views. The Court found that under customary international law, all States have an obligation to prevent significant harm to the climate system, and that to discharge it, States must implement regulatory mitigation mechanisms designed to achieve the deep, rapid and sustained emissions reductions necessary to prevent that harm. The Court expressed an expectation that this includes the regulation of both public and private operators.
The Court warned that a State's failure to take appropriate action to protect the climate system from greenhouse gas emissions – including through fossil fuel production, fossil fuel consumption, the granting of exploration licences or the provision of subsidies – may constitute an internationally wrongful act attributable to that State. Such breaches, the Court said, may give rise to the entire panoply of legal consequences under the law of State responsibility: obligations of cessation and non-repetition, and consequences requiring full reparation, including restitution, compensation and satisfaction.
As an expansion of fossil fuel production, the HVO Continuation Projects would represent a failure by Australia to take appropriate action to protect the climate system. These are serious and complex questions of international law with potentially enormous liability repercussions. The Commission should at a minimum seek specialist legal advice from the Crown Solicitor's Office.
2. Approving the projects risks the achievement of the NSW net zero target
The proponent has sought to position the project as consistent with New South Wales' net zero trajectory, proposing a voluntary contribution to the state's emission-reduction targets through carbon offsets, and stating that in the short term the primary approach will involve the use of carbon offsets and Safeguard Mechanism Credits.
This representation rests on an unscientific overestimation of the role offsets can play in abating emissions from fossil fuel production.
Safeguard Mechanism Credits are not carbon offsets. They represent a volume of a facility's emissions below its Safeguard Mechanism baseline in a given year. They do not represent emissions reductions or avoidance – only an accounting gap between a facility's emissions and an otherwise arbitrary regulated limit. The Clean Energy Regulator states outright that SMCs aren't offsets.
Most Australian Carbon Credit Units suffer from significant integrity concerns. Over the past five years, three method types – Human-Induced Regeneration, Avoided Deforestation and Landfill Gas – have been responsible for 88 per cent of all ACCUs generated in New South Wales, and all three have a long history of third-party criticism. The most recent peer-reviewed literature confirms these concerns are unresolved. Probst et al. (2024) in Nature Communications found systematic over-crediting across carbon crediting projects globally. Macintosh et al. (2025) in Nature concluded that carbon credits are failing to help with climate change. Romm et al. (2025) in the Annual Review of Environment and Resources concluded that many of the most popular offset project types feature intractable quality problems.
Most ACCUs generated in New South Wales do not represent real-world emissions reductions. Approximately 62 per cent of ACCUs generated by projects located in NSW over the last five years came from avoidance projects. For all avoidance projects, the claimed abatement can only be quantified against a counterfactual, and does not result in actual removals of greenhouse gases from the atmosphere – raising fundamental questions about whether such projects can ever satisfy the additionality requirement inherent to offsetting.
There are inherent limits to offsetting. The 2025 Land Gap Report found that approximately 1 billion hectares of land would be required to meet the carbon dioxide removal pledges of all countries, and warned that a handful of high-emitting countries continue to depend on unrealistic levels of land-based removal that cannot be achieved without major impacts on livelihoods, land rights, food production and ecosystems. Offset use must therefore be limited and prioritised for the most necessary activities where abatement is genuinely difficult.
Carbon offsets cannot cancel out fossil fuel emissions. Carbon stored biogenically in forests, land and marine ecosystems cannot compensate for CO2 released from burning fossil fuels. Once in the atmosphere, 20 to 30 per cent of emitted CO2 remains for longer than 1,000 years, making fossil-derived CO2 effectively permanent in ways biogenic storage cannot match. Land-based storage is also vulnerable to reversal through fire, flood and drought, whose frequency and severity will increase as warming intensifies. The Australian Academy of Science warned in its report to the Chubb Review that climate change presents direct and indirect risks to the future accumulation and maintenance of carbon abatement.
An overreliance on land-based carbon offsets by the HVO Continuation Projects puts the achievement of NSW net zero targets at risk.
3. The assessment substantially understates the project's climate costs
The proponent's documents include an economic impact assessment prepared by consultancy EY, dated August 2025 and submitted as Attachment M. The proponent cites it as its primary source for the project's net economic contributions, stating on the basis of EY's report that the amended project is desirable and justified from an economic efficiency perspective. The Department of Planning, Housing and Infrastructure appears to have adopted EY's findings in its own assessment report.
Climate Integrity has reviewed that assessment and identified errors, flaws and methodological concerns that result in it overstating the project's positive economic impact and understating its climate costs.
The exclusion of Scope 3 emissions removes 98 per cent of the climate harm
The proponent's estimates for lifetime Scope 1 and Scope 2 emissions total 15.1 MtCO2e and 0.2 MtCO2e respectively, while the estimate for lifetime Scope 3 emissions is almost 800 MtCO2e. Scope 3 represents more than 98 per cent of the project's projected contribution to global emissions.
EY excludes these emissions entirely from its assessment of climate costs.
EY's assertion that the guidelines and technical notes do not require consideration of Scope 3 emissions is at odds with the technical notes' own guidance, which encourages proponents to assess and disclose potential Scope 3 impacts on the basis that doing so would reduce residual uncertainty around total project emission impacts and be viewed favourably as evidence of strategic consideration of future emission levels and cost exposures.
The US EPA methodology is misapplied to the emissions EY does count
EY's assessment purports to rely on the United States EPA's Social Cost of Carbon to estimate the environmental and social costs of the project's emissions. The EPA's Social Cost of Carbon is a sound and widely accepted basis for estimating the future net impacts of greenhouse gas emissions.
But a valuation built on that methodology is only meaningful if it accounts for all emissions attributable to the project and applies the source methodology faithfully. EY's assessment does neither. Climate Integrity has recalculated the social cost of carbon, correcting four departures from the source methodology, each of which reduced the climate cost EY reported:
The discount rate. Despite the EPA report expressly rejecting the use of an opportunity-cost-of-capital rate for long-horizon climate damages, EY applies a 7% discount rate to the social cost of carbon, rather than the 2% near-term rate prescribed by the EPA methodology. This single departure reduces the estimated cost by approximately 34 per cent.
The vintage of the carbon prices. EY anchors its carbon price trajectory to the EPA's 2020 emission-year values but applies them as if they were 2025 prices, understating the cost of every year's emissions by a further 10 per cent or so.
The apportionment metric. EY chose an apportionment metric – apportioning costs to NSW on a population basis – that minimises the state's share of emissions cost. NSW is around 0.11 per cent of global population, but around 0.46 per cent of the global economy based on Gross State Product and around 0.54 per cent of the Earth's land area. Apportionment is also difficult to reconcile with Australia's international obligations. The duty clarified by the International Court of Justice is to prevent significant harm to the climate system, not to prevent New South Wales' proportionate share of it. On that framing, the relevant measure of the project's climate cost is the global figure.
The dollar-year basis. EY's main text presents the greenhouse gas externality as net present value in 2025 Australian dollars. According to Appendix C, where the figure derives, the underlying values are in fact expressed in 2024 dollars, understating cost compared with benefits by around 2.6 per cent.
Corrected estimates of the climate cost
Recalculating the estimated costs of greenhouse gas emissions, correcting for these methodological issues and incorporating Scope 3 emissions, produces the following damage estimates.
The total greenhouse gas externality cost attributable to the proposed project is estimated – using the same US EPA central case scenario adopted by EY – at $314.2 billion globally in real 2025 Australian dollars.
These figures should be regarded as conservative. The EPA states that its own estimates likely underestimate the marginal damages from greenhouse gas emissions, and the constant-rate discounting simplification adopted here understates the EPA's preferred certainty-equivalent method by a further 1 to 2 per cent.
Scope 1 and 2 emissions alone exceed every claimed benefit. Once the methodological departures are corrected, the global social cost of carbon attributable to the project on the basis of Scope 1 and 2 emissions alone is almost $6 billion ($5,982 million), exceeding EY's estimated net present value benefits of $5,692.4 million.
This comparison is significant because no market-substitution argument is available against it. Whatever view is taken of whether other suppliers would replace HVO's coal, the diesel combustion and fugitive methane emissions counted in Scope 1 occur at this mine or not at all. On EY's own benefit figures, and using EY's own choice of carbon price source, the projects' on-site emissions alone are sufficient to extinguish the claimed net benefit to New South Wales.
When Scope 3 emissions are accounted for, the global social costs of the project exceed EY's estimated benefits by more than 55-fold.
Mortality impacts
Advances in climate attribution science allow the human harms of greenhouse gas emissions to be estimated with growing sophistication, including additional excess deaths attributable to a fossil fuel project as a result of worsening extreme heat, flooding, wildfires, drought and sea-level rise.
Using the mortality cost of carbon approach developed by Bressler – under which, on a baseline emissions trajectory, roughly every 4,434 tonnes of CO2 emitted in 2020 causes one additional death worldwide over 2020–2100 – the HVO Continuation Projects would likely contribute to an additional 182,000 excess deaths globally by 2100.
4. The assessment substantially overstates the project's economic benefits
Climate Integrity has also reviewed the broader economic impact assessment dated 4 August 2025. We raise the following concerns about the methodology and assumptions underpinning it, which work to exaggerate the benefits of the projects and downplay their local and broader economic harms. It is concerning that many of EY's conclusions were adopted uncritically by DPHI in its assessment report.
Coal prices are assumed to remain constant between 2027 and 2045
EY's analysis assumes the price of coal received by the project will remain constant from 2027 to 2045 – a fixed A$151.80 per tonne for metallurgical coal and A$119.70 per tonne for thermal coal – when coal prices are in structural decline.
A flat price for the next 20 years is inconsistent with global energy outlooks and with global decarbonisation commitments, including the net zero targets of both New South Wales and Australia. The IPCC and the IEA have warned that global demand for coal, and by extension global coal prices, will decline dramatically by 2040 under scenarios consistent with the Paris Agreement.
The latest IEA World Energy Outlook forecasts that under its Net Zero scenario, the price of coal imported into Japan will be 62 per cent lower than present levels by 2035 and 68 per cent lower by 2050. Coal imported into China would fall 55 per cent by 2035 and 63 per cent by 2050. Under that scenario, Asian-region coal prices fall to between US$57 and US$59 per tonne in 2035 (A$81 to A$84) and to US$49 (A$70) by 2050. Even under conservative policy scenarios, Asian-region coal prices are still expected to fall significantly.
EY's adoption of a flat coal price to 2045 leads to a substantial overestimate of the project's revenues and its ability to generate broader economic benefits, by as much as 200 per cent. These projected declines are also significantly larger than EY's own 'low coal price' sensitivity analysis, which assumed a 25 per cent decline. Even that sensitivity will overestimate future revenues, as it is inconsistent with global commitments to the Paris Agreement.
Given the proponent's recognition that the coal would be exported primarily to countries that are signatories to the Paris Agreement, EY's assumption that prices will remain fixed at current levels through to 2045 is not credible.
Worker benefits are based on an implausible counterfactual
EY estimates that the project would generate a new economic benefit to NSW workers of $1.16 billion over its life, calculated on the basis of higher average wages paid to project employees than to similar occupations outside the mining sector in NSW.
But this is the continuation of an existing mine in a region saturated with coal operations competing for the same labour. The realistic counterfactual for most of the 1,311 full-time equivalent employees considered by EY's assessment is employment at another mine at comparable wages, with the net economic benefit to NSW workers near zero.
Our recommendations to the Commission
The Commission should seek its own independent, accurate economic modelling that considers the costs to NSW of all greenhouse gas emissions attributable to the projects, and give little weight to the conclusions of the economic impact assessment authored by EY.
The Commission should seek legal advice from the NSW Crown Solicitor's Office on the legal risks to Australia under customary international law of approving the projects, in light of the International Court of Justice's climate opinion and its clarification of Australia's obligations.
The Commission should form its own independent view, informed by the latest peer-reviewed science, on the credibility of the proponent's claim that the project is consistent with NSW's net zero target – a claim resting on an unscientific overestimation of the ability of carbon offsetting to genuinely abate the project's emissions.
It is our view that in weighing the true climate-related risks, economic costs and harms of the HVO Continuation Projects, the Commission will find these far outweigh any benefits to New South Wales, and that the project is not in the public interest. On these grounds, the project must be refused.
