Oxy-fuel combustion is an effective technology for carbon capture and storage (CCS). Oxy-combustion for coal-fired power stations is a promising technology by which to diminish CO2 emissions. Unfortunately, little attention has been paid to the oxy-combustion characteristics affected by the combustion atmosphere. This paper is aimed at investigating the oxy-fuel combustion characteristics of Australian coal in a 0.3 MWth furnace. In particular, the influences of various oxygen flow rates and recirculated flue gas (RFG) on heating performance and pollutant emissions are examined in O2/RFG environments. The results show that with increases in the secondary RFG flow rate, the temperatures in the radiative and convective sections decrease and increase, respectively. At a lower oxygen flow rate, burning Australian coal emits lower residual oxygen and NO concentrations. In the flue gas, a high CO2 concentration of up to 94.8% can be achieved. Compared to air combustion, NO emissions are dramatically reduced up to 74% for Australian coal under oxy-combustion. Note that the high CO2 concentrations in the flue gas under oxy-coal combustions suggest great potential for reducing CO2 emissions through carbon capture and storage.