Australia ranks 17th in a global Green Tax Index which analyses tax incentives and penalties used to drive sustainable corporate behaviour.
The index was created by tax advisory company KPMG International to increase awareness of the complex, fragmented and rapidly evolving green tax landscape worldwide.
It also provides opportunities to reduce exposure to green tax penalties and make use of green tax incentives.
KPMG said the index was created because in today's business climate corporates need to factor in green tax considerations when making investment decisions.
The index covers 21 major economies, focusing on key policy areas such as energy efficiency, water efficiency, carbon emissions, green innovation and green buildings.
The first index report finds that the US, Japan and UK (in that order) rank top in their use of green taxes as a tool to influence corporate behaviour.
France, South Korea and China rank fourth, fifth and sixth respectively. The countries differ in the balance they adopt between incentives and penalties and in the target areas they choose to influence, whether its climate change, water use, or green innovation.
Australia ranked 17th in using tax as a tool to drive sustainable corporate behaviour and achieve green policy goals behind China, India and South Africa.
The head of KPMG's environmental tax team in the UK, Barbara Bell, said green taxation is a rapidly evolving and increasingly complex area.
"Businesses face a multitude of challenges worldwide, and those which operate on a multinational basis face a sometimes bewildering array of different taxes and incentives. And, yes, this is an area of tax management which requires an investment of knowledge and effort, not to mention resources," she said.
"If addressed with knowledge and pro-activity, however, the challenges can become opportunities."
Bell said governments worldwide are increasingly using green taxes as a tool to change corporate behaviour and to assist with environmental policy objectives.
"Our analysis shows that at least 30 new green tax incentives, penalties or significant regulation changes have been introduced in the countries we studied since January 2011," she said.
"A pro-active approach to green tax can help companies reduce the cost of strategic investments, drive innovation, improve efficiency and secure competitive advantage.”
Following are the 21 rankings in the correct order, as listed in the index:
United States, Japan, United Kingdom, France, South Korea, China, Ireland, Netherlands, Belgium, India, Spain, Canada, South Africa, Singapore, Finland, Germany, Australia, Brazil, Argentina, Mexico, Russia.