The pain, and the profit, of $500bn market in tackling global warming

Sir Nicholas in effect abandoned hope of stabilising emissions at current levels

The sheer number of statements from business groups welcoming the conclusions of the Stern report of the economics of climate change appeared to show there were no losers and only winners from its plans to tackle climate change.

In fact businesses look set to bear the brunt of the impact. A detailed analysis of the UK buried in the 600-page report showed that six sectors would suffer more than 80 per cent of the whole impact of the cuts in carbon emissions required.

Although Tony Blair, Gordon Brown and Sir Nicholas Stern were all keen to promote cutting carbon emissions as a huge business opportunity, there will clearly be losers, at least in the short term.

Sir Nicholas, the lead author and former chief economist at the World Bank, envisages cutting total greenhouse gas emissions by about three-quarters by 2050. He put the annual price tag at about 1 per cent of the global economy - equivalent to about £300bn a year. He said it would come either through higher taxes or the creation of a global market in carbon emissions to force polluters to pay for the true social cost.

The key to cutting global warming is to curb the volume of fossil fuel emissions - which make up about two-thirds of all emissions.

While power companies account for a quarter and other energy activities add another five per cent, emissions by industry, transport and even from buildings collectively make up 36 per cent. The rest comes from non-energy emissions such as deforestation and agriculture.

Since the report proposes forcing users to pay for the cost of the social damage caused by carbon emissions either via permits or taxes, put simply - businesses and consumers will have to absorb a 1 per cent price hike.

As power companies are the big polluters, they are likely to bear the brunt of the impact of the Stern report because they will have to go through the most substantial restructuring. Heavy users of energy such as steel and chemicals producers will also face a heavy bill for carbon use - or must start investing in new technologies.

In a detailed study of the UK economy, the report said that six industries out of the 123 sectors tracked by official UK statisticians would take the brunt of this 1 per cent increase in costs. They were: gas supply and distribution, 25 per cent; refined petroleum, 24 per cent; electricity production and distribution, 16 per cent; cement, 19 per cent; fertilisers, 5 per cent; and fishing, 5 per cent.

Since the price will go up, demand for these goods and services will fall. The report highlights a 30 per cent-plus hike in gas prices, a 22 per cent rise in petrol prices and a staggering 117 per cent in coal costs.

The impact is a double blow for companies that are exposed to competition with rivals from companies that have shunned carbon trading - notably the US and China - who can keep their prices low.

The report warned that countries that did not jump on the green bandwagon could see their industries queuing for the exit door. It highlighted the influx of aluminium producers to Iceland to take advantage of the country's shift towards renewable energy generation.

Yesterday the Association of Energy producers said the electricity industry wanted to be part of the solution to climate change.

David Porter, its chief executive, said his members would invest £20bn over the next 20 years but would need to see a robust and enforceable carbon trading system to give them the confidence to invest in greener technology.

The other industry in the firing line will be the airlines, especially in the light of a clear hint by Mr Blair that any global carbon trading scheme should include aviation.

The sector is currently 12th in the UK in terms of carbon intensity. Asked directly whether his report spelt the end of £5 flights across Europe by operators such as Ryanair and easyJet, Sir Nicholas said: "The whole point about carbon pricing is to make those goods more expensive. The aim of the game is that entrepreneurs move away from them."

Andy Harrison, the chief executive of easyJet, said that low-fare airlines would embrace the Stern proposals because they had already scrapped the old model of "flying half-empty aircraft in and out of congested hub airports". "We fly brand-new aircraft and we fly them direct and as full as possible," he said.

What he would fight would be plans to use taxation as a stick to beat industry. "Taxes don't help the environment - they only fill governments' coffers and burden the economy," he said.

But the fact that the only critics were environmental groups furious that Sir Nicholas, had not used his report to promote a hair-shirt approach to cutting greenhouse gases, indicated that businesses might have been let off the hook.

Sir Nicholas in effect abandoned any hope that the world could stabilise emissions at the current level of 430 parts per million (ppm). Instead he said the world should aim to keep emissions between 450 and 550ppm - a level green campaigners believe is a death sentence for millions of people in poor countries.

But poor countries will be the greatest beneficiaries of any success in curbing emissions; doing nothing would wipe out agriculture across vast areas of the world, leading to famine, and submerge low-lying countries under rising seas.

In the western world too there will be winners. The expansion of the European energy trading system, the largest carbon market in the world, to a global system would create a whole new industry.

Brokers and finance houses would benefit from focusing on the new market in emissions permits as would other financial intermediaries such as lawyers, registrars and firms that monitor, audit and verify emissions.

Nuclear power - which has already been highlighted by the UK's energy review - also appeared to be big winner.

Electricité de France said it was ready to spearhead the UK's nuclear power-plant building drive. Vincent de Rivaz, its chief executive, said: "We have set up a nuclear project team. We want the Government to be confident that they can rely on us to deliver safe, economical new nuclear in the UK."

The report also identified a potential market for low-energy products worth $500bn a year by 2050. Margaret Beckett, the Foreign Secretary, said yesterday: "There is a real economic opportunity and this will be most enjoyed by those countries that generate a first-move advantage".

She added that companies that had already looked at curbing their emissions had found they were able to wipe millions of pounds off their cost bill.