Australia on Thursday approved a controversial coal mine extension, doubling down on a commitment to continue extracting fossil fuels despite growing pressure to cut carbon emissions.

Environment Minister Sussan Ley green-lighted Whitehaven Coal's Vickery mine extension near Sydney, just a week after the pro-coal conservative government said global demand was rising and vowed to keep mining coal for export.

It comes ahead of the United Nations COP26 climate conference in Glasgow in November, and as world leaders urge Australia to step up climate action and commit to a target for reaching net-zero emissions.

In her decision, Ley said she "found that the approval of the proposed action is consistent with Australia's commitments under the Paris Agreement", adding the mining firm had identified Japan, South Korea and Taiwan as likely customers.

The mine has attracted controversy in Australia and a lawsuit from eight teenagers who scored a major victory in May when a judge agreed extending it would cause them climate-related harm.

But while the federal judge ruled the government must take into account the damage the project would do to the group's health, wealth and wellbeing, he rejected their calls for an injunction to stop the project outright.

"The minister has a duty to take reasonable care to avoid causing personal injury to the children when deciding... to approve or not approve the extension project," Justice Mordy Bromberg found.

Ley has attached a number of conditions to the mine -- which will produce a mix of coking coal used to make steel and thermal coal for electricity generation -- including that threatened species living in the area and nearby rivers are protected.

However, Tim Buckley, from the Institute for Energy Economics and Financial Analysis, slammed the move as "ignoring the science of climate change and the rapidly escalating economic cost of inaction".

"The Australian court system has ruled that our government has a duty of care to future generations, but our Federal government continues to ignore this -- and increased stranded asset costs will be the direct result," he said.

Australia is one of the world's largest producers of coal and natural gas, but has also suffered under increasingly extreme climate-fuelled droughts, floods and bushfires in recent years.

A study published in the journal Nature last week found that 89 percent of global coal reserves -- and 95 percent of Australia's share -- must be left untouched to address the climate crisis.

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