State budgets may be raking in royalties from thermal coal exports now but governments need to prepare for a bleaker future, including job losses.

A report by the independent Institute for Energy Economics and Financial Analysis shows key allies are turning to renewable energy and away from coal-fired power in response to the energy crisis and high prices.

The strong returns for Australian coal miners contrast strongly with the long-term outlook for export volumes, which is one of ‘‘permanent decline’’, analyst Simon Nicholas said on Wednesday.

The Russian invasion of Ukraine has seen a push for energy security and cleaner energy production, with the long-term fate of Australian coal exports largely outside the control of state and federal governments.

Australia’s coal exports made up almost one-fifth (19 per cent) of the global thermal coal trade in 2021, with Indonesian exports at 42 per cent, official data shows.

Most of Australia’s thermal coal exports are from New South Wales, where the state government last year forecast a long-term decline in the major industry.

Report co-author Andrew Gorringe said the accelerating transition in Asia could push export volumes down more quickly, and closer to the NSW Treasury’s ‘‘worst case’’ scenario of zero by 2042.

‘‘At this stage of the energy transition, high prices will destroy long-term demand for coal even faster,’’ Mr Gorringe said.

He said declining demand will also cut hundreds of mining jobs per year and the only question is whether that transition will be planned and orderly, or chaotic.

As Australia’s largest thermal coal buyer, Japan’s pledge last year to boost its 2030 emissions reduction target is a significant hit, the report said.

As a result, Japan’s new 2030 power plan relies more on renewables and will see coal and gas-fired power slashed. It is also recommitting to nuclear power and scaling up offshore wind, batteries, hydrogen and solar.

China, Australia’s second-biggest market, and India are expected to rely more on domestic coal and continue to consume vast quantities for electricity generation.

Europe is replacing banned Russian coal with supplies from Australia, Colombia, the United States and South Africa, with coal imports and coal-fired power generation tipped to be higher in the near term.

However, this will not mark the start of a ‘‘renaissance’’ for coal-fired power in Europe, the report said.

Heightened energy security concerns and record fossil fuel prices are expected to only accelerate Europe’s transition to other sources of energy.

Meanwhile, Australia’s other potential markets have fallen away as Vietnam, Pakistan, Bangladesh and the Philippines significantly cut imported coal’s role in long-term power planning.