Australia could see its coal export industry falter faster than anticipated, as major buyers like China and India move to bolster domestic production and reduce reliance on imports.

New modelling by Climate Resource forecasts Australian thermal coal exports to plunge by nearly 80% by 2035 under a scenario consistent with global efforts to limit warming to 1.8 degrees Celsius, local media reported. Metallurgical coal, crucial for steelmaking, is projected to fall by 54% over the same period.

The stark outlook hinges on a "low-demand" scenario in which Asia's industrial giants prioritize local coal sources. India has already declared its intention to cease coal imports entirely by 2026. While China has yet to make such a definitive move, analysts believe it may increasingly turn to domestic suppliers as it tightens climate targets.

Anita Talberg, decarbonization lead at Climate Resource, urged policymakers to take the low-demand case seriously because there's a real possibility.

Australia's Treasury has also flagged looming risks, estimating coal and gas export values could halve by 2030. The federal government is attempting to pivot towards clean energy industries, such as critical minerals and green metals, whose global demand is expected to surge as decarbonization accelerates.

Still, Talberg cautioned that the pace of preparation may be too slow, especially when it comes to supporting coal-dependent regions.

The transition will not be uniform across states. New South Wales is dominated by thermal coal, while Queensland primarily extracts met coal. Talberg emphasized the need for tailored timelines to reflect these regional differences.

Australia's global climate role is also growing. It joined over 90 countries in endorsing the Belem Declaration to support a just and swift transition away from fossil fuels. As the "president of negotiations" of the 2026 UN climate summit (COP31), Australia will need to reconcile its domestic energy exports with its international ambitions of ditching fossil fuels.

Brazil, host of the COP30, has directed its ministries to fast-track a national fossil fuel exit strategy. South Korea, another major Australian thermal coal customer, pledged to eliminate coal-fired power by 2040.