About 10,000 delegates from almost 190 countries are aiming to build a new international pact to combat global warming.
The two-week conference is expected to produce the so called Bali roadmap to a climate change agreement after the 1997 Kyoto Protocol, a commitment by developed countries to stabilize greenhouse gas emissions, expires in 2012.
On the first day Australia's new Prime Minister Kevin Rudd ratified the Kyoto protocol, leaving the United States as the only major polluter not to have signed the agreement.
The Kyoto Protocol obliges the 35 industrial states that have ratified the document to cut emissions by 5% below 1990 levels by 2008-2012.
Developed and developing countries have been locked in a dispute over who should bear the main burden for carbon emission restrictions.
German Chancellor Angela Merkel, who has made climate change a central issue of her country's presidency at the G8, said earlier Germany should set an example for other nations at the Bali conference.
"A timetable must be decided upon in Bali under which we negotiate a successor agreement to Kyoto by the end of 2009," she said.
She said Germany is committing 1.5 billion euros (US$2.2 billion) to boost research into energy efficiency and climate protection.
"We are thereby setting an example for other countries, and we hope that our resolutions also set precedents, and that we can all come together internationally to implement ambitious climate goals," she said.
On January 1, 2008, Germany will hand over the G8 presidency to Japan, which has pledged to pursue the energy and climate change issues.
The conference will also discuss mitigation, adaptation, technology and financing.