A ground-breaking report due on Monday will say that the impact of global poverty, conflict and mass migration due to climate change far outweighs the costs of taking urgent action to counter global warming.
The report by chief British government economist Nicholas Stern will underpin efforts to reach a new global deal to combat climate change when the current Kyoto Protocol agreement ends in 2012.
The United States, the world's biggest producer of greenhouse gases that cause climate change, pulled out of Kyoto saying taking action would too expensive and cost jobs.
The report, by the former World Bank chief economist, tackles US scepticism head-on by seeking to prove the costs of tackling global warming are small compared to the potentially enormous impact of runaway climate change in year's ahead.
In his closely-argued 700-page review Stern says action to curb the most dangerous effects of global warming will hold back growth in the world economy only slightly over the next 45 years, said a source who had seen a draft.
But the effects of uncontrolled climate change could be devastating, Stern says in a report pitched at policymakers who gather next month to discuss extending Kyoto.
"He will talk a lot in that report about the scale and urgency of what's required," said John Ashton, special representative for climate change at the British foreign office.
"We are all (including Britain, Europe) going to have to do an awful lot better. There is no government which has in place the policies that will eat into this at the scale and with the urgency necessary at the moment," he said in an interview.
A scientific consensus is emerging that global greenhouse gas emissions, except from food production, will have to shrink to near-zero by mid-century, said Ashton - requiring a huge leap given that emissions are rising in the European Union.
"We need to get very close to a zero carbon global energy economy. This is the biggest structural shift in the way the global economy works that has ever been attempted by humanity, it's an enormous demand of any economy." Stern will stress that taking action on climate change offers benefits, given that a major way to cut greenhouse gas emissions is by burning fossil fuels more efficiently, offering huge cost-savings.
To drive the necessary energy investment changes he will call for a global carbon price, whether through carbon taxes or carbon markets - affixing a clear cost to pollution.
This would build on rather isolated existing carbon markets, such as in the European Union and among countries that have ratified the Kyoto Protocol, and mooted markets in California and other US states.
"We'll need to develop deep and liquid carbon markets," said a Treasury source. "The combination of price and trading schemes will be central to drive financial flows (investment in emissions cuts)." Carbon markets set an overall cap on emissions of greenhouse gases but allow companies or countries to trade rights to emit.
The idea is that businesses and countries that can cut emissions cheaply will over-achieve and sell their surplus rights to emit to others, cutting the overall cost of cuts.
Stern wants an expansion of carbon trading between rich and poor countries under Kyoto, from some $2.8 billion last year to tens of billions of dollars annually, said the source. Britain has raised the alarm on climate change in the run-up to Stern's review. Prime Minister Tony Blair and his Dutch counterpart Jan Peter Balkenende said last week the world had just 10 to 15 years to take steps to avoid catastrophe.
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