The Australian federal government has sensationally backflipped on its refusal to pledge money to the UN-backed Green Climate Fund, announcing a 165 million U.S. dollar contribution.

Australia had previously come under heavy scrutiny for failing to acknowledge the fund, with Prime Minister Tony Abbott even going as far as saying it should be abolished at the recent G20 summit in Brisbane. "We are (already) doing a very great deal and I suppose given what we are doing, we don't intend, at this time, to do more," he said at the time.

Australia had also refused to attend a Green Climate Fund Conference in Berlin in November.

However, following pressure from the United States, Japan and several leading environmentalists, Australia's foreign minister Julie Bishop announced the funding on Wednesday at the UN's Climate Change Conference in Peru. "Our pledge to the Green Climate Fund will facilitate private sector-led economic growth in our region... with a particular focus on investment, infrastructure, energy, forestry and emissions reductions," Bishop told the conference.

"It is now contingent on all of us to make sure the Green Climate Fund funds are distributed efficiently, transparently and to maximum effect."

In a statement released on Wednesday, Abbott revealed that Australia's reversal in its stance against the Green Climate Fund was down to changing circumstances. "We've seen things develop over the last few months," Abbott said. "I think it's now fair and reasonable for the government to make a modest, prudent and proportionate commitment to this climate mitigation fund. I think that is something that a sensible government does."

The prime minister also announced that the substantial 165 million U.S. dollar pledge, which will be paid over four years, will be withdrawn from Australia's aid funding.