Australia will join other countries in the region in examining how to wind back billions of dollars in fossil fuel subsidies, as the business sector and politicians seek to tackle climate change.
The issue is on the agenda of the APEC leaders' summit this weekend, hosted virtually by New Zealand Prime Minister Jacinda Ardern.
She told a business forum held in the lead-up to the summit on Thursday there was a strong commitment to boosting political and business co-operation on environmental sustainability.
"I'm proud of the progress APEC has made this year, including in beginning to turn the tide on the adoption of fossil fuel subsidies which have created devastating environmental degradation by masking the true cost of fossil fuels and inhibiting the transition to adoption of renewable alternatives," she said.
One of the key issues is how far APEC economies will go to rationalise and phase out subsidies.
"We would look at what the impacts are of these subsidies and look at what are the alternatives that you could use if you were looking to phase them out over time," Australia's Trade Minister Dan Tehan said.
"Which are the ones that you might get consensus, remembering that APEC is a consensus-based organisation ... to be able to reduce the impact of some of these subsidies."
South Korean President Moon Jae-in told the business forum: "Coal and oil can no longer be sustained as energy sources.
"We must lead a great transformation of civilisation to new energy solutions."
Prime Minister Scott Morrison, who is expected to address the leaders' summit late on Friday, told the business forum much of the success of tackling climate change lay in ensuring critical minerals used for solar panels and other technologies were more easily accessible.
He said the supply chain for such minerals was "very dependent on largely one supplier, which has the ability to apply a lot of monopolistic power to prevent other supply chains being developed".
China is by far the world's largest source of critical minerals.
"Australia feels very strongly about ensuring that the alternative supply chains around rare earths and critical minerals can be developed and support whole new lists of customers that operate at various points down the chain," Mr Morrison said.
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Australia is championing the supply chain strategy through the Quad partnership with Japan, India and the United States.
China has been critical of the Quad as well as the creation of the new AUKUS pact between Australia, the US and UK, seeing the groupings as destabilising the region and undermining existing bodies such as APEC.
Earlier at the same meeting, Chinese President Xi Jinping warned the Asia-Pacific region must not return to the tensions of the Cold War era.
He also said China's emission-reduction plans are likely to present "huge market opportunities" in coming years, and invited businesses in the region to join his country in this endeavour.
Mr Xi said attempts to draw ideological lines or form small circles on geopolitical grounds were bound to fail.
"The Asia-Pacific region cannot and should not relapse into the confrontation and division of the Cold War era," Mr Xi said.
The leaders will also discuss the recovery from the COVID-19 pandemic and the digital economy.
Members of the Asia-Pacific Economic Cooperation group are responsible for more than 60 per cent of global economic output and 47 per cent of world trade and is home to 38 per cent of the world's population.
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Australian Associated Press
