The head of the International Monetary Fund looks forward to hearing the Abbott government's plans to combat climate change and hopes the nation remains a pioneer on the issue.
Christine Lagarde appreciates there are different approaches to handle "environmental degradation", which she said is classified by economists as an external cost.
"Externality must have a price and once that price is identified and determined, then it has to be dealt with either by way of incentives, or by way of taxation, or by way of cap-and-trades, or by way of auctions," Ms Lagarde told the ABC in Sydney on Thursday.
"There are multiple ways of dealing with it, but it has to be dealt with."
The coalition government is trying to scrap Labor's carbon tax in preference of a Direct Action climate plan, while standing by a five per cent carbon emissions reduction by 2020.
"I was really pleased to see that the government is maintaining its objective and clearly we will be interested in seeing what the proposals are," Ms Lagarde said.
The financial chief has previously championed Australia's pioneering role in working to combat climate change and said on Thursday she "certainly hopes" that doesn't change.
