Yes, it will cost us money to reduce emissions to 60% of current level by 2030, but if we fail to act the cost will be far greater. If we act now, the cost might be as low as 1% of combined GDP growth for all. By contrast, the cost of inaction could be a world recession far more serious than that of 1929. Basically, the Great Depression of the 20th century cost the world about 10 years' of output growth.

Nick Stern is hardly the first economist to warn of the dangers of climate change; green taxes were first recommended back in the 1980s. But Stern's weighty and detailed calculations carry great authority and impart a sense of urgency to an issue which many governments have either ignored or responded to with mere gestures. In the US, George W Bush has claimed repeatedly that cutting carbon emissions is 'too expensive'---such cuts might put the economy at peril. The Stern Report stands Bush's argument on its head.

How are the necessary cuts in carbon emission to be achieved and how are we to pay for them? We already know a great deal about what needs to be done to cut emissions, whether it involves moving towards new sources of clean energy such as wind farms, reducing our energy consumption by using public transport or improving energy efficiency by insulating our homes.

But how do we pay? Changed consumption patterns means changing the use of resources, and reallocating resources has a cost. Most economists agree that a combination of green taxes, emission caps and permits and changes in public and private spending priorities can do the trick.

In the case of the UK, the Stern Report suggests that, if we act at once, the total cost might be of the order of €100 billion. The UK is one of the larger EU economies, comparable in size to France and Italy. A rough idea of the required cost for each member-state can be derived by comparing its per capita GDP to the EU-25 average.

The European Parliament has recently voted to tax airline fuel and include the airlines in the EU's emissions trading scheme; the vote means that the Commission must now take these ideas forward. This is good news. But does it go far enough in paying for the necessary changes? The answer is a resounding 'no'.

If the EU wants to meet emission reduction and stabilisation targets, it must adhere to two principles. First, part of the cost must be borne by the energy consumer in the form of green taxes and trading permits. Second, part of the cost must be borne by cutting back on other forms of consumption. Typically, too little attention is paid to the second principle.

An excellent example is cutting back on unnecessary defence expenditure such as, in the case of Britain, its Trident missile programme. Chris Huhne, formerly an MEP and currently the Liberal Democrats spokesman for the environment, estimates that it will cost Britain around €100 million to buy new missiles and submarines and maintain the system for 30 years.

In an important piece in last Saturday's Guardian, John Vidal and others show in detail that if instead of buying Trident this money were spent on shifting to alternative forms of green energy and greatly enhancing the country's efficiency of energy use, Britain would almost certainly meet the target set in the Stern report.

While during the Cold War there may have been a case for maintaining a nuclear deterrent, today the Trident missile system is a hugely expensive anachronism. In the words of the Labour MP, Joan Ruddock: "The question is, how we best achieve our own security? It has to be through global co-operation over climate change---which is a greater threat than any conflict." Much the same argument applies to France's deterrent.

In Europe today, the question is no longer whether climate change is a threat. Almost everybody agrees that we must do something quickly, and we now have a pretty fair idea of how to reduce emissions.

How do we pay for it? Before declaring that ordinary working people must radically change their lifestyle and give up their package tour to the Costa del Sol, let us first prune back senseless expenditure on nuclear weapons that don't deter, on the ever-expanding security state, on huge salary increases for corporate executives and on a CAP which mainly benefits agribusiness. The list is a long one!

The author is Research Professor at SOAS in London and author of the recent book 'Regaining Europe', London: Federal Trust, 2006.