With its use of coal-fired power and relatively small population of 23 million, Australia is one of the world's worst per capita greenhouse gas polluters and has been increasingly isolated over its perceived reluctance to do more to tackle the climate threat.

It follows the world's most powerful economies last month urging "strong and effective action" on climate change, catapulting the issue onto the final statement of G20 talks hosted in Brisbane despite pressure from Australia to stick to economic matters.

"All countries should take practical and proportionate steps to take action on climate change while safeguarding economic growth," said Prime Minister Tony Abbott in a joint statement with Foreign Minister Julie Bishop who is at a UN climate summit in Peru.

The pledge follows the United States contributing US$3 billion and Japan up to US$1.5 billion. France, Germany, Britain, Canada and a host of other countries have also donated large sums, leaving Australia conspicuous in not chipping in.

The government had previously indicated it was not interested in the fund, but Abbott said at a press conference: "We've seen things develop over the last few months.

"I think it's now fair and reasonable for the government to make a modest, prudent and proportionate commitment to this climate mitigation fund. I think that is something that a sensible government does."

The money will come over four years from Canberra's foreign aid budget.

- Pressure on emissions -

Greens Party leader Christine Milne said Australia had clearly been forced into acting.

"There is no way Australia could have continued with its stand against global finance (of tackling climate change) and be viewed as negotiating in good faith here in Lima," she said from the climate talks in Peru.

WWF-Australia chief Dermot O'Gorman welcomed the government's move but said the money should not be coming out of the foreign aid budget.

"We are disappointed that the contribution is not additional to Australia's existing aid budget, which was significantly cut in the May 2014 budget, and we urge the government to find additional funds to continue supporting our vulnerable neighbouring nations," he said.

Abbott, who since coming to power a year ago has dismantled a carbon tax designed to combat climate change, said the cash would bring total international contributions above the fund's initial target of US$10 billion by the end of the year.

"The pledge to the Green Climate Fund will facilitate private sector led economic growth in the Indo-Pacific region with a particular focus on investment in infrastructure, energy, forestry and emissions reduction programmes," he added.

The fund is a mechanism designed as a way for wealthy countries to help poorer ones to become greener and to bolster their defences against the effects of climate change.

Before heading to Peru, Bishop said despite Australia being one of the worst per capita polluters, Australia's emissions amount to only about 1.5 percent of those globally.

She argued that "those countries that are emitting the most have the greatest responsibility in terms of the totality".

Australia has committed to reducing its carbon emissions by five percent below 2000 levels by 2020, and has announced a Aus$2.55 billion (US$2.12 billion) Emissions Reduction Fund to give polluters financial incentives to cut back.

Environmentalists say it ought to target 15 percent.