Energy prices soared worldwide following Russia’s invasion of Ukraine. Russia is the world’s third largest coal exporter, behind Indonesia and Australia, meaning that turmoil in Russia causes disruptions in international coal markets.

Before the invasion, coal prices had already risen to high levels due to a range of domestic and international factors. As a result, the value of Australian coal exports skyrocketed from $39 billion in 2020-21 to $112 billion in 2021-22, a 186 percent or $73 billion increase.

Overall, coal companies receive around 60 percent of the windfall benefit while just 40 percent accrues to governments, despite economic theory suggesting 100 percent of windfall gains can be taxed without affecting industry incentives.

The purpose of this paper is to estimate the size of the windfall gains to coal companies and governments. The authors also analyse the royalty schemes in New South Wales and Queensland to develop a simple proposal to deliver more of the windfall to the Australian public.