Introducing the report by Nicholas Stern, the British government also said Monday that former U.S. Vice President Al Gore, who is now a vocal environmental advocate, is to serve as one of its advisers on the issue.
The report's main argument is that the benefits of coordinated action around the world to tackle global warming will greatly outweigh any financial costs.
But Stern, a former World Bank economist, who wrote the report commissioned by ministers, concludes that ignoring climate change could lead to huge economic upheaval.
"Our actions over the coming decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century," he said.
The report said global warming could result in melting glaciers, rising sea levels, falling crop yields, drinking water shortages, higher death tolls from malnutrition and heat stress, and outbreaks of malaria and dengue fever.
And richer nations must be prepared to pay more than poor ones to counter their higher emissions output, for example by green taxes or carbon trading schemes.
"The poor countries will be hit earliest and hardest ... It is only right that the rich countries should pay a little more," Stern said.
The report admitted its forecasts on how climate change would affect the global economy rested on sparse data about high temperatures and developing countries, and put monetary values on human health and the environment, "which is conceptually, ethically and empirically very difficult."
But UK Prime Minister Tony Blair said if no action were taken, climate change could cost the world up to 20 percent of global gross domestic product (GDP) each year.
Blair said: "This is the most important report on the future published by this government in its time in office."
The prospect of global warming is "frightening," but the scientific case that it is taking place is now "overwhelming," the PM added.
"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." 'Global solution'
Finance minister Gordon Brown, who is expected to take over as prime minister next year, said harnessing markets was the best way to find new methods to cut polluting gases.
Brown proposed an EU-wide target for emissions reductions of 30 percent by 2020 and 60 percent by 2050 and expansion of the carbon trading scheme to cover over half of emissions.
"Stern's report sees climate change as a global challenge that demands a global solution. The truth is we must tackle climate change internationally or we will not tackle it at all," Brown said.
Also Monday, the United Nations Framework Convention on Climate Change said greenhouse gas emissions by industrialized countries were rising and the U.S. remained the biggest polluter.
The report puts the UK at odds with its main ally. U.S. President George W. Bush withdrew from the Kyoto Protocol -- which urges the 35 richest countries to cut carbon emissions from burning fossil fuels in power plants, factories and cars -- partly because he said it hit jobs.
But Stern said the action needed to avert the worst effects of climate change was "manageable," adding: "We can grow and be green."
The Stern review says the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change can be limited to just 1 percent of global GDP each year.
People would pay slightly more for carbon intensive goods, but the world's economies could continue to grow strongly.
Environmental Economist Professor Stephen Smith, from University College London, told CNN the role of Al Gore was important to sell action on climate change to the rest of the world.
"The British government has recognized that it needs to do more than simply speaking to domestic audience ... it needs to build a new coalition to agree cuts in greenhouse gas emissions on the global stage, and Gore's role is clearly in that."
The report was welcomed by environmental campaigners and business leaders.
Charlie Kronick of Greenpeace said it showed the current generation must now defeat climate change.
"We always knew that the scientific and moral case for action was overwhelming, but this report is the final piece in the jigsaw," he told the Press Association.
"There are no more excuses left, no more smokescreens to hide behind, now everybody has to back action to slash emissions, regardless of party or ideology."
Richard Lambert, director general of the Confederation of British Industry, said emissions trading between nations was required as a "nucleus" for action.
"Provided we act with sufficient speed, we will not have to make a choice between averting climate change and promoting growth and investment," he told PA.
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