Global warming is seen everywhere as one of the most important issues. From the EU to the G8, leaders trip over one another to affirm their commitment to cutting CO2 to heal the world. What they do not often acknowledge - in part because it would lose them support - is that the solutions proffered are incredibly costly and will end up doing amazingly little good, even in a century's time. This is the truly inconvenient truth of the politics of global warming.

Let's be clear. I'm not contesting the existence of global warming. Doing so is silly, given the clear and strong results from the UN climate panel. Global warming will most probably warm the planet by between 1.6 and 3.8C above current temperatures by the end of the century. The total cost of the consequences of this warming is estimated by William Nordhaus, of Yale University, to be $15 trillion.

However, we need to keep our cool: global warming's total cost will be only about one half of 1 per cent of the net worth of the 21st century; that is the current worth of all the wealth projected to be generated in this century. Panicking is unlikely to lead to sensible policies. It could lead to exorbitantly expensive policies, which will do great harm.

Many of the proffered global warming policies are designed to help politicians bathe in the warm glow of good intentions, with little or no regard to the mounting costs and infinitesimal benefits.

It is a well-rehearsed point that the Kyoto Protocol was a terribly inefficient, hugely costly way to do virtually no good. Even if every industrialised country, including the United States, had accepted the protocol, and everyone had lived up to its requirements for the entire century, it would have had virtually no impact, even a hundred years from now. It would reduce the global temperature increase by an immeasurable 0.15C by the year 2100. The cost of implementing Kyoto, taking the average figure from the various top macroeconomic models, would have been almost £100 billion annually for the rest of the century.

The US declined to sign up to Kyoto and many countries, including Spain, Japan, Canada, and Greece, have had a hard time living up to their pledges. It is likely that the total reduction in carbon emissions will be less than 5 per cent of what Kyoto promised.

Yet the EU and others advocate that Kyoto-style policies are still right, only that much more than Kyoto is needed. The EU has promised to cut its emissions by 20 per cent by 2020, through a 20 per cent increase in renewables. There seems to be no better reason for this decision than that 20 and 20 in 2020 sounds good. Gordon Brown has wholeheartedly backed the plan, which includes making a dramatic increase in renewables - mainly 3,500 wind turbines in the North Sea.

The British Government estimates the cumulative carbon saving from all its plans at somewhere between 950 and 1,100 million tonnes of CO2 by 2030. The Department for Business will not give a figure beyond that timeframe but, given that wind turbines have a lifetime of about two decades, this seems the relevant cumulative reduction given the investment. The department confirms that the total investment from public and private sources into renewables will be about £100 billion.

Computer modelling - using DICE (dynamic integrated model of climate and the economy) - shows that the net effect of the UK renewables effort is impossibly tiny. The temperature increase by 2100 without Mr Brown's plan would have been 2.4536181C. With the best-case scenario the huge UK effort means that the temperature at the end of the century would be 2.4532342C. The effect is a difference of about 0.00038C - or about one three-thousandth of a degree in a hundred years. This is the equivalent of delaying the temperature increase by the end of the century by a little less than a week.

Of course, these numbers are way too precise: different models and assumptions would give somewhat different results. Yet because we are talking about relative change, the absolute climate sensitivity of the particular model matters very little. Thus the order of magnitude is robust and indicates an astonishingly small effect for a very large cost.

If one imagines that the reductions could be sustained across the century (which presumably would also call for five repeated investments of hundreds of billions of pounds), the effect is still very small - a temperature reduction of about one six-hundredth of a degree.

Using the latest academic meta-study by Professor Richard Tol we can calculate that cutting 1,100 million tonnes of CO2 would create benefits worth £4 billion in terms of the impact on agriculture, forestry, preventing deaths from heat and cold, disease and unmanaged eco-systems. At a cost of £100 billion, the investment involves paying £1 to do less than 4p worth of good.

The UK emits about 2 per cent of global CO2. Thus we could imagine the world as composed of 50 UKs, each emitting one fiftieth of the carbon. If all 50 of our “UKs” paid a £100 billion to reduce temperatures by one three-thousandth of a degree in 100 years, the result would be still be trivial: one sixtieth of a degree by the end of the century. Costs would most probably increase similarly, fiftyfold to £5,000 billion. This amazing sum would simply postpone global warming and its problems by a mere 11 months by the end of the century.

The cost of £5,000 billion is equivalent to a hundredfold increase in global donations to developing countries. To make a simple comparison, the UN estimates that for about £40 billion annually, we could solve all major basic problems in the world - we could give clean drinking water, sanitation, basic education and healthcare to every person in the world. But instead we are spending a fortune achieving almost nothing.

Of course, we shouldn't ignore global warming. But instead of trying to cut CO2 emissions, we should focus on dramatically increasing the funding into energy research and development. What matters is getting low-cost low-carbon technology available faster. If the price of renewable energy dropped below the cost of fossil fuels by mid-century, everyone - including China and India - would switch to the greener alternatives. Work done by the Copenhagen Consensus suggests that such a policy could be 300 times better for the world than the UK approach. We could end up doing more than £11 worth of good for each £1 invested. While we would do much more good in total terms, the cost would also be much lower, and hence much more likely to be implemented.

When it comes to climate, we have to come to our senses. Yes, global warming is real and caused by human beings, but it doesn't mean we should panic in our policy decisions. We need to do the right thing - and invest in discovering and developing new low-carbon technology.

Bjørn Lomborg is adjunct professor at the Copenhagen Business School and the author of Cool It: The Sceptical Environmentalist's Guide to Global Warming

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