Introduction

Australian regional economies with high reliance on fossil fuel industries face structural change as global decarbonisation progresses. The report applies an adaptive capacity framework to eleven LGAs in Queensland, New South Wales, Victoria and Western Australia to assess their resilience. Adaptive capacity is defined as the ability of a region to adapt and prosper through change. Indicators are benchmarked against non-capital-city LGAs to highlight strengths and vulnerabilities. The analysis suggests that transition planning must be place-based, reflect regional conditions, and update over time as population and industry profiles shift.

Seven dimensions of regional adaptive capacity

Adaptive capacity is assessed across seven dimensions: economic diversity, innovation and entrepreneurship, geographic connectedness, financial capital, workforce skills, social capital, and access to public services. These dimensions are used to identify enabling conditions for future industries, guide targeted investments, and support livability. The framework is intentionally multi-dimensional to allow localised analysis rather than relying on a single index.

Economic diversity

All fossil-fuel-exposed regions show low economic diversity. Isaac records the lowest Hachman Index score (0.1), reflecting heavy concentration in coal mining, where 67% of its workforce is in fossil fuel industries. Latrobe and Narrabri are the only LGAs with Hachman Index scores above the regional benchmark, supported by more varied industry bases. Karratha and Ashburton have substantial workforces outside fossil fuel industries but remain highly concentrated in metal ore mining, which limits resilience. Increasing economic diversity is a priority across all LGAs.

Innovation and entrepreneurship

Some regions show strong innovation capacity. Singleton, Muswellbrook, Mid-Western Regional and Collie record higher-than-average business R&D expenditure, with Singleton reaching the highest levels among the studied LGAs. Business entry rates are particularly high in Karratha. However, many LGAs have lower levels of entrepreneurship, indicating a need for targeted support such as collaborative research partnerships, local venture financing, and industry–university linkages.

Geographic connectedness

Proximity to capital cities varies significantly. Singleton, Muswellbrook, Latrobe, Collie and Mid-Western Regional are within 200 km of capital cities, supporting access to diversified markets and supply chains. Karratha and Ashburton are roughly 16 hours’ drive from Perth, limiting domestic integration and increasing reliance on export-oriented industries and fly-in fly-out labour forces.

Financial capital

Ten of eleven LGAs score above the benchmark on the Index of Economic Resources, with Singleton the highest. However, long-term risks include declining property values as fossil fuel industries exit and potential wage reductions as workers move into lower-paid clean-economy roles. Households will need support mechanisms to smooth transition impacts.

Workforce skills

Post-school education levels are generally high, with Certificate III/IV qualifications dominant. STEM workforce shares range from 15–25%, above the regional average of 13%. These skills offer a strong base for new industries such as advanced manufacturing, energy technologies and minerals processing. Collie has the lowest proportion of university-educated residents, while Karratha has the highest.

Social capital

Volunteering rates are below the regional average in nearly all LGAs, ranging from 10% in Muswellbrook to 17% in Banana. Lower social capital may reflect transient workforces and indicates the need to strengthen community networks and local participation.

Access to public services

Most LGAs have lower-than-average access to teachers and healthcare workers. Latrobe and Collie are exceptions in healthcare access, and Mid-Western Regional is the only LGA with above-average teacher ratios. Service availability will be critical for retaining residents during transition.

Different fossil-fuel-exposed regions will require different policy responses

While all LGAs require increased economic diversity and stronger social capital, regions differ substantially in innovation capacity, location, and workforce characteristics. Pilbara and Central Queensland LGAs may require significant investment in infrastructure and industry development. Hunter Valley LGAs and Collie show strong potential for leveraging existing innovation ecosystems.

Supporting the development of adaptive capacity in Australia’s fossil-fuel-exposed regions

Transition plans should be community-led, tailored to regional strengths, and include investment in enabling conditions such as infrastructure, workforce development and service access. A single replacement industry is insufficient; diversified development is required.

Regional groups and local councils

Local institutions should lead planning efforts, supported by external expertise where needed. Councils must identify competitive advantages, engage stakeholders, and address existing lock-ins.

State and federal governments

Governments should coordinate frameworks, fund transition plans, and integrate place-based innovation policy. The national Net Zero Authority can play a central role in aligning efforts and supporting region-specific strategies.

Conclusion

Regions will need targeted investments across economic, social and service dimensions to navigate the transition. Strengthening adaptive capacity will support long-term resilience and diversified regional economies.