Environment Minister Greg Hunt reached the agreement with his state and territory counterparts in Canberra on Tuesday to have a national clean air agreement in place from July 2016.

Mr Hunt said the ministers had agreed to a "down payment'' which would see the states and territories toughen reporting standards on air pollutants and impose new emissions standards for wood heaters.

They also agreed to introduce measures to address the dumping of low quality outboard engines from overseas on the local market, which has resulted in additional air and water pollution.

"The big item here is to work towards the overall clean air agreement where you'd have harmonised laws with the states, tighter air quality standards,'' Mr Hunt said.

"All of the jurisdictions are in agreement … How we improve air quality in our cities is the real goal of the national clean air agreement.''

In NSW, air pollution is monitored by the state Office of Environment, which operates hundreds of monitoring sites around Sydney, Newcastle and Wollongong, as well as rural areas.

In 2010, it started monitoring coal dust in the Hunter region, which in some cases appeared to be surpassing safe levels for particulate pollution.

According to some research, wood smoke is also a main local pollutant, with potentially serious health effects.