Sir Nicholas Stern, the former chief economist at the World Bank, will advise that the costs of confronting climate change are far outweighed by those of failing to act in time. His 700-word report forecasts floods, famine, mass movement of people and the destruction of species if the Earth’s temperature continues to rise.

Gordon Brown, who commissioned the report, will accept its main recommendation for a global carbon-trading scheme to enforce limits on greenhouse gas emissions. The Chancellor will also announce that Al Gore, the former US Vice-President, is to advise him on environmental policy.

Sir Nicholas’s report, hailed as the most comprehensive study of the economics of climate change yet, makes the case for early action to avoid a calamitous recession later. Acting now to cut carbon emissions would cost 1 per cent of global GDP a year; by doing nothing, the costs at the time would be a minimum of 5 per cent and as high as 20 per cent of GDP a year, he concludes.

The report looks at the risks of uncontrolled climate change, saying that 200 million people may be permanently displaced if the world’s temperature rises by 3C (5.4F) from pre-industrial levels, and that rising sea levels from melting ice sheets could threaten the homes of one in every twenty people if temperatures go up by 2C-3C. All countries will be affected by global warming but the effects will be most severe on the poorest areas, potentially leading to more famine in Africa and leaving millions unable to produce or purchase sufficient food, it says.

Between 15 and 40 per cent of species would face extinction if the world’s temperature were to rise by 2C.

The second half of the report looks at reducing carbon emissions. Much of its focus is on the need for international agreements: Britain alone contributes only 2 per cent of global emissions. The report’s key recommendation is for international agreement on the need to stabilise levels of greenhouse gas emissions, with a series of options on ranges between 450 and 550 parts per million of emissions in the Earth’s atmosphere, and the costs of each. The lowest figure of 450 parts per million is close to current levels of emissions.

Once such an agreement was reached, there could be several ways of meeting the target — the most important of which would be to expand and unify regional carbon-trading schemes to create a global market. This should make polluters pay for high emissions and stimulate demand for low-carbon technology. Sir Nicholas also proposes doubling spending on research and development to about £10.5 billion, and giving more resources to poor countries to help them to compete.

His recommendations are intended to shape an international agreement to supersede the first phase of the Kyoto treaty, which ends in 2012, although he wants any replacement to start several years sooner and to include the United States, China and India.

Discussions on a post-Kyoto deal resume at UN talks in Nairobi in two weeks’ time, but the Government also hopes to influence Angela Merkel, the German Chancellor, who has made climate change a priority for her country’s presidency of the G8 group next year.

Gordon Brown will pledge today that Britain will lead the international effort to tackle climate change. He will also propose expanding the EU’s carbon-trading scheme, linking it with others in California, Australia, Japan and elsewhere, as the basis for a global carbon market, as Sir Nicholas calls for. By 2010 the global carbon market could be worth $70 billion (£37 billion), he will say. The Chancellor will propose new EU targets for a 30 per cent cut in emissions by 2020 and 60 per cent by 2050.

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