Business as usual on climate change will lead the world into "dangerous territory" and could derail economic growth, according to a ground-breaking report.
Sir Nicholas Stern's review of the economic and environmental impact of failing to curb the planet's carbon dioxide emissions has been hailed as a landmark by the prime minister.
Commissioned by the Cabinet Office and Treasury in July 2005, it warns that global warming could cost the world up to £3.68 trillion.
Introducing the 600 page report at a press conference on Monday, Sir Nicholas said: "When people do not pay for the consequences of their actions we have market failure.
"This is the greatest market failure the world has ever seen."
Sir Nicholas, head of the government's economic service and former World Bank chief economist, also said: "The task is urgent. Delaying action even by a decade or two will take us into dangerous territory.
"We must not let this window of opportunity close."
Risks
Sir Nicholas warned of "very large" changes to physical and human geography, including floods, droughts, storms and sea level rises.
"We now know that business as usual involves very high risks," he said.
"It's likely to imply a rise of 4-5c or more above pre-industrial levels within the next 100 to 150 years.
"This is way outside human experience."
He pointed out that due to the lag between emissions and warming, the world is "already committed to at least half a degree centigrade more" in the next few decades.
Costs
To avoid potentially catastrophic consequences, Sir Nicholas called for around one per cent of global GDP, some £184bn, to be spent now on tackling climate change.
Failing to act could mean costs that are between five and 20 times higher, reaching some £566 for every one of the 6.5 billion people now on the planet.
He said: "It's like a one-off increase by one per cent in the price level. That's manageable. We can grow and we can be green.
"But we can go further than this, there will be new opportunities, new markets worth hundreds of billions per annum.
"Economically speaking mitigation is a very good deal. Business as usual on the other hand will eventually derail growth."
Action
Sir Nicholas outlined a flexible course of action, and said different countries can reduce emissions in different ways.
The European 'cap and trade' system should be expanded, the study concluded, and investment in energy research should be doubled.
Africa and developing nations should also receive extra funding to deal with global warming.
And "market failures" need to be addressed, such as problems in property and capital markets which inhibit investment for energy efficiency.
Sir Nicholas repeatedly stressed any solution must be multilateral, and said managing a transition to a low-carbon economy "cannot be left only to energy and environment ministers, important as they are.
"This is about managing an international economic transition. Heads of government and finance ministers have to be at the heart of the story."
