Former chief economist of the World Bank and currently the UK treasury economist Sir Nicholas Stern, in a report released today correlates the economic impact of environmental damage caused by greenhouse emissions.By Rajiv Shankar

According to a study commissioned by the UK government, which was released in London today, environmental damage could shrink the global economy by a fifth at a cost of up to £3.68 trillion (approximately Rs31,427,200 crore) unless drastic action is taken.

Prepared by former chief economist of the World Bank Sir Nicholas Stern, who is the UK treasury economist, the 700-page study says taking action now to reduce carbon emissions, would cost just 1 per cent of global GDP or approximately $350 billion - the equivalent of paying just a per cent over our normal spending.

However, some economists believe that since climate science is so uncertain there is no need to spend huge amounts to cut emissions at this stage. But Sir Nicholas warns that failure to act now could end up costing between 5 per cent to 20 per cent of the global GDP.

The report, based on the first major study on the impact of global warming by an economist rather than a scientist, also warns that doing nothing to halt the sustained environmental damage, would result in up to 200 million people becoming refugees as their homes are hit by drought or flood.

The report has warned that unless the world moves to cut green house gases, it is heading for a "catastrophic climate change" which would create the worst global recession ever seen.

Sir Nicholas recommends that the European Union should expand its carbon trading market by forming links with the US, Australia and Japan has called for an EU-wide target to reduce emissions by 60 per cent by 2050.

Commenting on the report to the UK-based Guardian's web edition, Michael Grubb, climate change and energy policy at Imperial College, London, and Cambridge University said, "The Stern Review finally closes a chasm that has existed for 15 years between the precautionary concerns of scientists, and the cost-benefit views of many economists.

"It finds that most economists' methods have been inadequate for a problem of this scale. Argued with meticulous economic detail, Stern concludes that the problem is indeed massive and urgent - but that it can be solved."

Stern has advocated linking of carbon markets; doubling research spending to $20 billion a year and extensive use of carbon capture systems, such as storing carbon dioxide underground.

The report was commissioned by Chancellor of the Exchequer Gordon Brown, who has recruited former US vice president Al Gore to advise the British government on tackling climate change. Gore, as vice president from 1993 to 2001, helped negotiate the Kyoto Protocol in 1997, which was later repudiated in 2001 by President George W Bush.

By drawing Gore in to its campaign, the Labour government is trying to draw the US back in to international talks to curtail global pollution. Brown says, "The truth is, we must tackle climate change internationally, or we will not tackle it at all."

Sir Nicholas, too, warns that unilateral efforts are doomed to failure; even if all power stations in the UK were to be shut down tomorrow, the reduction in global emissions would be negated in just over a year by increased emissions from China.

The Stern Review, as the report is called, says the key to solving the crisis is getting the big polluting countries, such as the US and China, to cut their emissions. Sir Nicholas also believes that polluters must be made to "pay the price" for the problems they are causing.

Some highlights of the report

• Floods from rising sea levels could displace up to 100 million people
  
• Melting glaciers could cause water shortages for 1 in 6 people in the world
  
• 40 per cent of wildlife species could face extinction
  
• Droughts may create tens or even hundreds of millions of 'climate refugees'
  
• Poor nations that have contributed least to climate change, would be the first to be hit and the impact on them would be the hardest. Africa is likely to be most harmed by climate change
  
• Switching to cleaner energy sources, like wind and solar, can help us avoid the worst of the damage
  
• Green taxes and changing behaviour will help reduce the effect of climate change - but schemes should be on a global scale
  
• Even if immediate action is taken to cut pollution, slow acting greenhouse gases will continue to have an effect on the environment for another 30 years

Constraints to meaningful global action

Implementing appropriate action at a global level faces four major obstacles - the same obstacles to action that were raised against the Kyoto Protocol even before it was conceived a decade ago:

• Entrenched resistance within the US to scientific consensus
  
• Reluctance of major developing nations to accept any constraints to their own economic growth
  
• Absence of global economic incentives to invest in less harmful coal plant technologies over the existing, ones
  
• Fear of advocating economic hardships that alienate voters

Speaking at the release of the report in London this afternoon, prime minister Tony Blair said there was "overwhelming scientific evidence" that climate change was taking place and that the consequences of failing to act would be "disastrous".

"This disaster is not set to happen in some science fiction future many years ahead, but in our lifetime. Unless we act now ... these consequences, disastrous as they are, will be irreversible," he said.