While this shows progress, experts warn the pace is insufficient to meet the Albanese government's legislated 2030 target of a 43% reduction. Achieving that goal would require an average annual cut of roughly 15 million tonnes, with even deeper reductions needed by 2035.

Electricity sector leads reductions

The biggest improvements came from power generation, Australia's largest emissions source. Emissions from electricity fell 0.8 million tonnes (0.5%), reversing a small increase seen the previous year when higher electricity use and lower hydro and wind output forced greater coal and gas burning.

Renewable energy growth, particularly wind and rooftop solar, contributed to the decline, along with modest increases in hydro. Coal and gas generation fell, though fossil fuels still accounted for 55% of electricity, compared with 40% from renewables and 5% from gas. The government aims for 82% renewable electricity by 2030, but investment in large-scale projects has slowed this year. Early data for April–June suggests a 3.2% emissions drop in the electricity sector, signaling a strong start for clean energy.

Industry, agriculture also improving

Other sectors saw smaller improvements. Emissions from industrial and stationary energy—including manufacturing, mining, and buildings—dropped 2.7%. Reductions in coal use for metal production and lower gas consumption in households contributed. Fugitive emissions from fossil fuel operations fell 2.2%, and industrial process emissions declined 4.7%. Agriculture saw a 1.3% drop, largely due to fewer grazing cattle and sheep.

Transport remains a challenge

By contrast, transport emissions continue to rise. Pollution from road, rail, aviation, and shipping increased 0.5%, driven by higher diesel and jet fuel use. Australia's diesel vehicle fleet has surged 93% since 2014, making transport the second-largest emissions sector after electricity.

Policy impacts and limitations

Climate Minister Chris Bowen highlighted that government measures, including electricity underwriting and a revised safeguard mechanism for high-emitting facilities, are producing results. Yet critics argue these measures are too weak, sometimes rewarding companies that increase emissions. New vehicle efficiency standards are expected to gradually reduce transport emissions.

The role of forests and land

Much of Australia's long-term emissions reduction is attributed to nature-based carbon absorption, such as forests and soils. While important, critics warn this is not a permanent solution, given increasing risks from drought, fire, and floods. Excluding land-based offsets, national emissions are only 3.7% lower than in 2005, highlighting the continued reliance on fossil fuels and the scale of the challenge ahead.