The report said failing to tackle climate change could push world temperatures up by 5C over the next century, causing severe floods and harsh droughts which may create up to 200 million environmental refugees.
Sir Nicholas Stern, the report's author and a former World Bank chief economist, said the world must be prepared to pay now to prevent an economic fallout on the scale of the Great Depression of the 1930s.
"There is still time to avoid the worst impacts of climate change, if we act now and act internationally," he said as he launched the 700-page report on Monday.
"The task is urgent. Delaying action even by a decade or two will take us into dangerous territory. We must not let this window of opportunity close."
Britain is pushing for a post-Kyoto framework that would include the United States - the world's biggest producer of greenhouse gases - as well as major developing countries.
President George Bush pulled the United States out of the Kyoto Protocol - which obliges 35 rich nations to cut carbon emissions from burning fossil fuels in power plants, factories and cars - in part because he said it hit jobs.
"There is still time to avoid the worst impacts of climate change, if we act now and act internationally."
Sir Nicholas Stern, author of the report looking at the economic impact of climate change
Stern's report estimates that stabilising greenhouse gases in the atmosphere will cost about one per cent of annual global output by 2050. Inaction, however, could cut global consumption per person by between 5 and 20 per cent.
"The Stern review has done a crucial job. It has demolished the last remaining argument for inaction in the face of climate change," British Prime Minister Tony Blair said at the launch of the report.
"We know now urgent action will prevent catastrophe and investment in preventing it now will pay us back many times."
Stern said that, on current trends, average global temperatures will rise by 2-3C within the next 50 years or so, compared with temperatures in 1750-1850.
If emissions continued to grow, the earth could warm by several more degrees, with severe consequences. Poor countries would be worst hit as melting glaciers initially increase flood risk and then hurt water supplies, eventually threatening one sixth of the world's population.
"Our actions over the coming few 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," the report says.
It calls for international frameworks on emissions trading, technology co-operation, deforestation and a co-ordinated approach to climate change.
Gordon Brown, the British finance minister, said harnessing the power of markets through a global carbon trading system was one of the best ways to reduce the output of polluting gases.
Brown proposed a new European Union target for emissions reductions of 30 per cent by 2020 and 60 per cent by 2050 and expansion of an existing carbon trading scheme to cover more than half of emissions.
Blair (L) called for urgent action
to tackle climate change
He said the scheme, which allows businesses to trade their emissions quotas, should be linked with Australia, California, Japan, Norway and Switzerland so as to set a global carbon price that fixes a clear cost for pollution.
The environmental group WWF welcomed the report as a "wake-up call" to the world.
The report "adds to the urgency of the upcoming UN climate change talks in Nairobi," the WWF said in a statement.
The WWF urged the 189 governments due to take part in the meeting on November 6 to produce a "clear" plan for a "Kyoto plus" treaty on reducing carbon dioxide emissions after 2012.
Meanwhile, the United Nations climate change secretariat announced that greenhouse gas emissions from industrialised nations rose in 2004 to the highest levels since the early 1990s.
Emissions from 40 nations, including backers of caps under the Kyoto Protocol and outsiders led by the United States, rose to 17.9 billion tonnes in 2004 from 17.8 billion in 2003 and 17.5 billion in 2000, it said.