The International Monetary Fund believes urgent action is needed to address climate change, recommending Australia put in place a carbon price above $A110 a tonne.
The IMF wants countries to shift away from fossil fuels and has suggested a series of measures to make the move happen.
"Global warming is threatening our planet and living standards around the world, and the window of opportunity for containing climate change to manageable levels is closing rapidly," the IMF report released on Friday said.
"The shift from fossil fuels will not only transform an economy but also profoundly change the lives of households, businesses, and communities."
The fund - one of capitalism's premier institutions - urges politicians to introduce carbon taxes, levied on the supply of fossil fuels from oil refineries, coal mines and processing plants.
"(They) are the most powerful and efficient, because they allow firms and households to find the lowest-cost ways of reducing energy use and shifting toward cleaner alternatives," the report said.
If carbon taxes aren't feasible, the IMF recommends emissions permit trading systems, fees and rebates, or regulations aimed at cutting emissions.
"Whereas a $US25 ($A23) a tonne price would be more than enough for some countries to meet their Paris Agreement pledges, in other cases - for example, Australia and Canada - even the $US75 a tonne carbon tax falls short," the report said.
Energy Minister Angus Taylor argued carbon taxes raised the price of energy so people consumed less.
But since the coalition abolished the Carbon Pollution Reduction Scheme, Australia's emissions and power prices have both increased every year.
Australia is only on track to meet its Paris climate targets because of investment made under the Renewable Energy Target, which the coalition repeatedly tried to abolish, and carry-over credits from previous reductions.
Australia is also one of the world's largest exporters of coal and is in the top 20 for carbon emissions per person, behind many of the oil-producing nations.
Mr Taylor said Australia would not introduce a $US75 a tonne carbon tax, which translated to $A110 a tonne.
Labor has been debating whether to follow the coalition's path on climate change, but shadow treasurer Jim Chalmers said his party believes in doing something "real and meaningful".
"The exact form of that and the nature of that and specific detail of that is something that we have almost three years to come up with," he told reporters in Melbourne.
The Australia Institute says the IMF report shows the carbon price would have almost zero impact on Australia's economy.
"In just two years under (Labor's) carbon price, Australia reduced emissions by two per cent, grew the economy by five per cent and added 200,000 jobs," its energy program director Richie Merzian said.