Roughly 20 million tonnes of greenhouse gas emissions could slip through this "loophole" analysed by RepuTex on behalf of the Australian Conservation Foundation and the Climate Council.
Without more stringent pollution rules on mine expansions and other safeguard mechanism flaws, the climate and environment groups warn emission reduction goals are at risk.
The safeguard mechanism captures more than 200 of Australia's big polluting facilities and forces them to lower emissions against legally binding limits - known as baselines - via genuine cuts through electrification or efficiency, or by buying carbon credits to offset their pollution.
A federal review of the scheme starts mid-year.
Australia has obligations to slash emissions under the international Paris agreement aimed at limiting dangerous global warming.
The safeguard mechanism is key to meeting Australian targets of a 43 per cent emissions cut by 2030 and 62-70 per cent by 2035.
The analysis prepared by the energy modelling consultancy suggests a bigger emissions-reduction burden will be shouldered by households and other industries if coal and gas companies are not forced to go harder.
Tougher rules on mine extensions is one opportunity.
The expanding footprints of existing sites are presently able to dodge stricter pollution limits on new greenfield projects.
Stronger pollution controls for new sites acknowledges facilities can be more easily built from the ground up with low carbon technology compared to retrofitting.
Especially so for factories but less so coal mines, which do have ready opportunities to electrify and stop methane escaping as sites sprawl.
Coal and gas expansions are already more common than new mine proposals despite both generating carbon pollution.
NSW recently became the first state to ban new greenfield coal mines, but expansions remain on the cards for at least another 25 years.
Climate Councillor and former BP executive Greg Bourne said coal and gas companies were getting a "free ride" while future-focused manufacturers were doing the hard work to make real emissions cuts.
"Every day we remain tethered to coal and gas, we are at risk of energy price pain caused by overseas conflicts and escalating climate costs in a warming world," he said.
"Closing loopholes in the safeguard mechanism will support a more resilient economy."
Shortcut baselines for coal were also criticised as they ignore huge variety in pollution generated by each site, allowing some miners to attract credits they can sell without making genuine emissions cuts.
Systemic under-reporting of fugitive methane at mine sites further threatens to blow out emissions budgets.
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