Warming global temperatures would be catastrophic for Australia and could cost the economy hundreds of billions of dollars over coming decades.
Treasurer Jim Chalmers will on Thursday release the 2023 Intergenerational Report which will map Australia's pathway into the 2060s.
It will show that if global temperatures increase beyond 2C there will be a direct impact on productivity, agriculture, tourism and natural disasters.
Higher temperatures could result in between $135 billion to $423 billion in lost productivity over the next 40 years while Australian crops could also reduce by up to four per cent by 2063 before changing rainfall patterns are also factored in.
But the destruction of crops would largely be avoided if warming is kept below 2C this century, the report states.
It predicts the increased frequency and severity of natural disasters will increase recovery funding payments more than three-fold by 2063 and the tourism industry will also take a significant hit if temperatures soar past the 2C limit.
If warming is limited to 1.5C, demand for Australian thermal coal would fall to one per cent of current levels by the 2060s but demand for lithium would jump eight-fold.
But if the world continues on a pathway to a 3C increase this century, Western Australia would bear the worst of the warming as would regional and remote communities.
"This highlights the need for effective mitigation of further temperature increases and targeted investment in adaptation," the report says.
But the report also notes "significant uncertainty around these estimates".
Treasurer Jim Chalmers said the government was addressing climate change seriously.
"The Intergenerational Report is all about making the big shifts in our economy and our society work for us and not against us," he said.
"Our economic plan is designed to make Australian businesses and Australian workers beneficiaries not victims of the shift to cleaner, cheaper energy."
