Australia’s greenhouse gas emissions fell 2.2% last financial year, in what the Albanese government says is the largest annual drop due to reduced fossil fuel use outside the Covid-19 pandemic.

About half of the 9.9m tonnes reduction was due to an increase in solar and wind generation pushing coal-fired power out of the system, according to new government data to be released on Thursday.

Pollution from power generation dropped 3.3%, or 5m tonnes, as the proportion of electricity from renewable energy across the year reached more than 40%. It reversed a brief rise in climate pollution from the power sector in the previous year.

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There were smaller emissions reductions from underground coalmines, heavy industry, farming and households burning gas for heating and cooking.

But pollution from transport continued to increase due to greater use of diesel-power vehicles and more people taking domestic flights.

The climate change and energy minister, Chris Bowen, was expected to use an annual climate statement to parliament on Thursday to argue the data showed Labor’s policies since its election in 2022 were having an impact on the amount of carbon dioxide pumped into the atmosphere.

The Coalition and the Greens have argued otherwise: that pollution had either increased under Labor or was flatlining.

Assessing the true picture has been difficult due to the impact of Covid-19 shutdowns, which resulted in a sharp artificial drop in the two years before Albanese came to office, and led to a rebound once restrictions were lifted.

It is unlikely the drop in emissions will be enough to put Australia on track to meet its climate targets.

According to the latest data, annual emissions to June were 437.5m tonnes – 28.5% below 2005 levels.

It is expected that an emissions projection report, also to be released on Thursday, will estimate the government’s policies will leave it short but still within reach of where it needs to be to meet its 2030 emissions reduction target – a 43% cut compared with 2005 levels.

The Climate Change Authority last year estimated reaching the target would require emissions to be cut by 15m tonnes a year over the next five years.

The projections report will show the government is much further behind meeting its recently announced 2035 target – a cut of between 62% and 70% below 2005 levels.

It means Labor will need to revamp existing policies and introduce new measures to get to even the bottom end of this commitment.

In a statement on the emissions data, Bowen said the government’s policies, including a renewable energy underwriting program and a home battery subsidy, meant the government was on track to reduce energy bills and meet its climate targets “if we stay the course and continue to lift our efforts”. He said renewable energy provided more than half the electricity in the national grid in October.

The reports released on Thursday do not include the emissions that result overseas from Australian coal and gas exports. A 2024 analysis found Australia ranked second behind only Russia for exported emissions.