The slide in investment has seen China consolidate its position as the world's renewable energy powerhouse, according to the the Climate Council Report, Lagging Behind: Australia and the Global Response to Climate Change.
“Investment that could be coming to Australia is instead going overseas to countries that are moving to a renewables energy future,” said the report’s co-author, Professor Tim Flannery said.
“Unfortunately the lack of federal government commitment to renewable energy is hurting the industry.”
Australia has come under pressure to cut its carbon emissions deeper after the European Union last week agreed on a new target of 40 per cent by 2030.
The agreement, labelled by the EU as a new global standard, also includes a 27 per cent target for renewable energy by 2030.
The coalition government has said it will consider a new post-2020 target in early 2015 before a United Nations conference in Paris, where a new commitment will be discussed and possibly settled.
Prof Flannery said over the past year investment in Australian renewable energy projects dropped 70 per cent, while China installed more renewable energy capacity than fossil fuels in 2013.
The global powerhouse also retired 77 gigawatts (GW) of coal power stations between 2006 and 2010 and aims to retire a further 20 GW by 2015, the report said.
The Climate Council report comes after the federal government announced it would conduct an inquiry on the effectiveness of emissions trading schemes around the world.
So far 39 countries have introduced a price on carbon, including major trading partners China and South Korea.
“The US is also rapidly exploiting the global shift to renewable energy, coming second only to China for installed renewable energy due to a range of state based renewable energy targets, incentives and initiatives,” said Prof Flannery.
Renewable energy generation in the US was 12.9 per cent of the total energy mix in 2013, which the report says puts the US on track to meet its international commitment to reduce emissions by 17 per cent below 2005 levels by 2020.
“The global energy transition from fossil fuels to renewable energy is now well underway,” said Prof Flannery.
The government has also come under pressure from Europe, the United Nations, scientists and the environment movement to ensure the upcoming G20 leaders’ summit makes a clear statement on climate action.