The Federal Government is seeking legal advice over a decision by the University of Western Australia to dump plans for a think tank linked to a controversial Danish academic.

Bjorn Lomborg, known for his contentious views on climate change, was to co-chair the advisory board for the $4 million Australian Consensus Centre being established to advise the Government on a range of social and economic areas.

After weeks of controversy surrounding the centre, the university bowed to public pressure and cancelled the contract on Friday.

Student groups applauded the decision, saying it was a win for academic integrity and common sense.

But a statement released by Education Minister Christopher Pyne's office described the university's decision as "disappointing" and that the centre would be established elsewhere.

"The Government is awaiting legal advice on the status of the contract," it said.

"The Government is committed to establishing the Consensus methodology in Australia and to ensuring a wide range of views on issues are aired publicly.

"It is surprising that individuals at an institution of higher learning claiming to embrace the notion of academic and intellectual freedom would display intolerance and shout down a voice in the debate they simply don't agree with."

WA Liberal MP Dennis Jensen, a known climate change sceptic, has described the university's decision as "disgraceful."

"Universities should be about challenging received wisdom rather than saying this is the received wisdom and no challenge to that will be countenanced," he said.

"The reality is freedom of speech and freedom of thought sometimes might be uncomfortable for certain groups of people, that's the nature of it.

"The problem here is that if you go back a few hundred years the university is more in line with the inquisition than it would be with those who question the inquisition and that's the real irony."

The university's vice chancellor Paul Johnson said the centre lacked the support needed to meet its contractual obligations and deliver value for money for taxpayers.