The world must dramatically rethink its economic model in order to tackle growing environmental stress, inequality and development challenges, the UN said Wednesday, calling for a "Global Green New Deal".

In a fresh report, the UN trade, investment and development agency (UNCTAD) called for countries to join forces and enable trillions of dollars in public sector investments to help reboot the global economy and counter climate change.

"Under the current configuration of policies, rules, market dynamics and corporate power, economic gaps are likely to increase and environmental degradation intensify," warned Richard Kozul-Wright, head of UNCTAD's globalisation and development strategies division.

What is needed, he told journalists, is to apply the same ambitious model used in the United States to overcome the Great Depression in the 1930s and apply it "at a global scale".

"What we need is a Global Green New Deal," he said, using the terminology proposed by progressive Democrats in the US who want to shift their country away from fossil fuels towards renewable energy with the aim of rapidly zeroing out greenhouse gas emissions.

If such policies were applied globally, they would help rein in rampant climate change, create millions of jobs and pave the way to meeting the UN Sustainable Development Goals (SDGs) for eradicating poverty and boosting human wellbeing by 2030, the report found.

Looming global recession

UNCTAD's flagship Trade and Development report painted a bleak picture of the global economic outlook, warning that the world risks slumping into recession next year, amid trade tensions, swelling corporate debt and the threat of a no-deal Brexit.

Even ignoring the worst downside risks, the report projected that global growth would fall to 2.3 percent this year from 3.0 percent in 2018, cautioning that global recession in 2020 was now "a clear and present danger".

"The slowdown in growth in all the major developed economies, including the US, confirms that relying on easy monetary policy and asset price rises to stimulate demand produces, at best, ephemeral growth," it said.

It urged a "clean break" from public sector austerity, and slammed the "market-friendly solutions" countries have championed since the 2008 global financial crisis, insisting they had "routinely failed" to boost productive investment.

It urged policymakers to replace their "obsession with stock prices, quarterly earnings and investor confidence" with a focus on jobs, wages and public investment in infrastructure and green energy.

UNCTAD economists acknowledged that "decarbonising" the global economy would require a significant rise in public investment in things like clean transport, energy and food systems, and especially financial support to help developing countries "leapfrog carbon-intensive development paths."

But they insisted the investments would pay off and in time significantly boost economic growth.

'There resources are there'

If the world increases its total green investments by 2.0 percent of global output, or around $1.7 trillion per year, it would generate at least 170 million additional jobs, lead to a cleaner industrialisation in developing countries and an overall reduction in carbon emissions by 2030, the report said.

While that may sound like a lot of money, UNCTAD pointed out that it represents just a third of what is currently spent by governments on subsidising fossil fuels.

"The resources are there. What we are missing is the political will," Kozul-Wright said.

The world's top scientists believe long-term temperature rise must be limited to 1.5 degrees Celsius over pre-industrial levels to prevent runaway warming.

If the world allows the planet to warm beyond 2 degrees Celsius, it will likely cost "hundreds of trillions" to respond to the effects of climate change, Kozul-Wright said, insisting that "we cannot afford not to do this."