Standing inside a straw-bale building for the first time is humbling. Its thick walls put double brick to shame, while the render is delicate and earthy. Hushed on the day we visit, the new green community hall at Fairfield Showground is solid evidence of the hours of labour put in by volunteers and council workers.

The project represents ground-breaking sustainable design and a commitment to the environment by local government - backed by a level of involvement that state and federal bodies can only dream of.

This passion of councils pre-dates the embrace of climate change issues by state and federal leaders and is producing innovative environmental programs across Sydney and NSW.

Fairfield City Council won an award at this year's Local Government Sustainable Development Conference for its work on the hall and surrounds.

The new building replaces a hall that was destroyed by fire and is there courtesy of an insurance payout. As Ross Smith, the council's manager of waste services, puts it: "We thought, OK, we've got some money to reinstate a hall, let's try to tie all this together on one site and make it a community hub, a sustainability hub."

The "all this" is the passive solar hall on the left, a shed-cum-office (built with recycled steel and timber) for a free bike-hire scheme on the right, and a hothouse and an earth-rendered nursery shed up the back. When completed, the hall will be a base for those involved with the indigenous plant nursery, the Western Sydney Cycling Network, local Aboriginal groups and others.

Residents' help was integral to construction and volunteers were trained at free council-run workshops. The building designer was Tracy Graham of Envirotecture and the work was overseen by the specialist builder Huff'n'Puff Constructions, but the idea to go for a straw-bale building came from a council staffer, Lisa Pendergrast. "The insulation properties of this blew everything else out of the water," she says. The use of straw bales is not the only striking feature of the hall. The concrete poured for its slab was made of 95 per cent recycled materials: old footpaths and driveways. Recycled cement has been used previously for pathways, but not in a load-bearing capacity, the council says.

"This is a structural slab," Smith says. "It has actually been signed off engineering-wise to hold the whole building. As far as we know, this is a world first, not just an Australian first."

The reason so many local councils have responded quickly and wholeheartedly to sustainability and climate change issues is clear to Genia McCaffery, the president of the Local Government Association of NSW and Mayor of North Sydney.

"It's because we are the level of government closest to communities," she says. "Both the state and federal governments are lagging way behind the level of environmental concern there is in the community. And that's why you get a much greater level of environmental activity at the council level than you're seeing at either state or federal levels.

"[In] North Sydney, what we're doing is very much a partnership with our community. We're certainly not pushing it, but we're harnessing that concern and assisting people to make changes to their own lives and making sure that the council is providing leadership as well, so we're making sure that we're doing the right thing in our activities."

That sense of connectedness between local council and residents is echoed by Ross Smith at Fairfield. "We [in local government] have an opportunity to really build a lot of community-based plans, objectives, projects which really can have genuine outcomes," he says. "We're the arm of government that's closest to the public. I even hate that word 'public'. I say residents."

In some instances, though, the other arms of government are critically involved, through funding. The council with the largest population in the state, Blacktown, is offering energy saving packages as part of the Federal Government's Solar Cities initiative. The packages, which range from special deals on solar electricity systems to free home-energy consultations, aim to save 25,000 tonnes of greenhouse gas emissions a year and save residents up to $3 million a year on electricity bills. The Federal Government announced last year that Blacktown would receive up to $15 million under the scheme.

The Mayor of Blacktown, Leo Kelly, says the council was focused on sustainability long before this. He says local government has "led the thrust" on the environment, while the Federal Government has "gone from no concern to almost total" in this election year.

The International Council for Local Environmental Initiatives, Australia and New Zealand, has pushed for reform of government legislation on climate control, Kelly says. The council, a non-profit organisation that promotes sustainability, helps councils cut their greenhouse gas emissions. The Cities for Climate Protection program that it helps deliver, funded by the Federal Government, saved its member councils 8.8 million tonnes of CO2 emissions between 1997 and 2006.

So is politics behind local government a concern for the environment? "No," says McCaffery, an independent. "The North Shore is generally more conservative than councils out west and councils around here have a lot of environmental initiatives, and western Sydney councils are exactly the same," she says. "Our communities want it and we're really reflecting what our communities want. It's not council pushing the environment agenda; it's both of us pushing the agenda that we both want."

McCaffery also believes councils have to keep their own houses in order when it comes to sustainability as well as providing education. "So many councils, like my own, are running workshops and information nights very much on what you can do in your own home to make your activities more sustainable." North Sydney has held information nights on water tanks, light bulbs and "why is green power better". "The two we've held this year, we've had to turn people away," she says.

The Mayor of Fairfield, Nick Lalich, says the straw-bale hall project is a sign of what people can do. "This way we show the people about sustainability and how we can use second-hand materials to build these buildings and how you can save money without it all going to landfill. We've got to lead by example."

Peter Dormand, the city, energy and resource manager of Newcastle City Council, agrees that councils must practise what they preach, which his council has done for more than a decade. "What's good about local government is that we're seen as the honest broker," he says. "We're here on a continuous basis compared with the other levels of government that obviously have to go through their election campaigns and things like that.

"What we say is that this climate-change issue is so enormous that anyone who thinks that the state and federal government's going to solve the problem for us has got rocks in their head. They don't have the money and they don't have enough resources. It's more that we all have to work together as a team with a view that if we don't we're going to be in trouble."