Climate change and higher transport energy prices are now pressing urban policy issues and increasing attention is being directed to the capacity of metropolitan planning to overcome these challenges. For the past two decades Australian metropolitan plans have focused on urban consolidation as a means of reducing transport energy demand. Transport energy dependence is highest in outer and fringe suburban areas. But the structure of urban housing markets means the capacity of current Australian urban planning policies to achieve consolidation objectives in middle and outer areas is highly constrained, especially if the delivery of density gains is delegated to the private sector. The article contends that current planning policies which rely on urban consolidation therefore have limited potential to produce significant transport emission reductions in suburbia. Such policies also risk generating socially inequitable distributional outcomes given higher transport fuel costs from an emissions trading scheme or higher global oil prices. The article calls for a comprehensive rethink of current metropolitan transport, urban planning and suburban development models to achieve reductions in transport energy dependence in the middle and outer suburban areas of Australian cities.