After months of internal debate, the Labor Environment Action Network (LEAN) has drafted a policy for the party to follow, which would put a ban on any public funds being used to subsidise the fossil fuel industry and shift communities reliant on mining into other industries.

Federally, Labor has attempted to walk the line between pushing for a shift to renewable energy while remaining in support of fossil fuel mining, with electorates, particularly in Western Australia and Queensland, still heavily reliant on the sector.

But the party has so far resisted pressure, particularly from the Queensland Labor government, to support using the Northern Australian infrastructure fund to help private mining companies build a train line deemed critical to opening the Galilee Basin up to coal mining.

Indian giant Adani has applied for a $900 million concessional loan from the government fund, to help finance a train corridor which would lead from the isolated mine site to the Abbot Point port.

Quarantining public funds from being used to help the fossil fuel industry is crucial to any Labor policy moving forward, LEAN co-ordinator Felicity Wade said, a move she said "most reasonable Australians" would support.

"The fossil fuel industry is a mature industry, these projects should stand or fall on their own financial merits. LEAN also believes existing fossil fuel subsidies should be dismantled," she said.

"If the private sector won't fund the Adani infrastructure, it is an irresponsible government that steps in with taxpayers' funds to prop up an un-economic proposal for private profit."

But she added it was an "uncomfortable fact" that for Australia, and the world, to meet the emissions reduction agreement adopted in Paris in 2015, which aims to keep warming well below 2 degrees celsius, "a significant proportion" of the globe's - and Australia's - fossil fuel reserves would need to remain untouched.

While the draft policy does not specifically address the Carmichael mine - billed as potentially the southern hemisphere's biggest, Ms Wade said "opening a new coal field in a time of spiralling climate change is a major problem".

But despite concerns from some within Labor and LEAN over the Adani project, the group was not going so far as to push Bill Shorten to abandon support for the mine, which is seen as critical to re-invigorating Queensland's economy.

"No individual mine is going to push climate change beyond 1.5 degrees," she said.

"The entire globe has to decide how to limit the exploitation of fossil fuels and how to do it fairly. It's hard to see how it's in our national interest to go it alone."

"Labor policy is built within the international framework in which fossil fuels are counted in the country in which they are burnt, not the source country.

"We need a coherent public policy response that deals with the fact that the carbon budget is finite and a significant percentage of fossil fuels still in the ground can never be exploited if we are to avoid disastrous climate change."

To meet the Paris Agreement, Ms Wade said the international community would have to address the "supply side" of greenhouse gas emissions, as well as limiting what each country used itself.

"Australia should use its middle-power status to lead this conversation," she said.

"With Canada, Australia is one of the only developed countries with large reserves of fossil fuels. It is in our national interest to ensure limits on fossil fuel extraction are fair while also ensuring the globe acts collectively to avoid the disaster of unfettered fossil fuel exploitation."

The proposed policy shift is expected to face fierce opposition from some quarters within the party, with fossil fuel mining still considered a bedrock of the Australian economy.