"The old political approach was wilful neglect: governments denying the problem or wringing their hands and saying that a country Australia's size couldn't possibly take on this global threat," Senator Wong told the Centre for Economic Development of Australia (CEDA) State of the Nation conference.

"The old political approach was to favour short-term political interests over long-term nation building. And the old approach ignored the stark reality that climate change is the biggest threat we face to our economic prosperity and way of life."

She said Australians saw the impact that climate change was starting to have and recognised that tackling climate change would not be easy.

"But Australians also understand that there is no cost-free option. It is true that emissions trading will have an impact on different prices in the economy. However, doing nothing certainly won't save us any money - the cost of continued neglect is far greater than the cost of responsible action now. Getting this reform right takes careful, methodical work."

As a small example of the risk facing Australia from climate change, around 711,000 coastal addresses were at risk from future sea-level rise, Senator Wong said.

She said best estimates showed that $25 billion in assets may be at risk from sea level rise and storm surge.

Senator Wong also indicated that big emitters would not be compensated under the coming emissions trading scheme.

"Many businesses would like compensation for their circumstances," she said, adding "these circumstances need to be considered alongside the government's responsibility to the economy and the community as a whole".

Climate Institute chief executive John Connor welcomed Senator Wong's speech as "a welcome return to sanity in the climate debate here in Australia.

"Penny Wong was clearly laying out the costs of inaction," Mr Connor told AAP.

"In it she highlights issues such as impacts already on agriculture and water and on coastal communities but also focusing on unlocking opportunities of a low-carbon future, to do that in the most cost-effective way and the broadest coverage from an emissions trading scheme.

(She is saying) a broader coverage gives you a broader dividend in terms of helping make that transition not only for businesses but for affected families."

Australian Greens leader Bob Brown agreed Senator Wong was on the "right track" but said the government had a lot further to go to reorient Australia's economy and society to tackle global warming.

He said he wanted to see more action from the federal government on protecting forests and banning the proposed $2 billion Gunns pulp mill in Tasmania, which he said would add two per cent to Australia's greenhouse gas emissions.

"I think the public's way ahead of the body politic here. There's more nous about the need for tackling climate change in the average classroom in Australia than there is in the cabinet table," Senator Brown said.

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