Existing economic models “grossly underestimate” the costs of global warming, undermining the urgency for deep cuts in greenhouse gas emissions, according to a new paper by leading UK climate change economist Lord Nicholas Stern.

The risks are in fact likely to be so large that a globally coordinated carbon price of $US32-$US103 ($34-$110) per tonne of emissions is needed as soon as 2015 to prevent the temperature increase from exceeding 2 degrees of pre-industrial age levels, said Lord Stern and co-author Simon Dietz, from the UK’s Grantham Research Institute.

Nicholas Stern says climate change costs aren't properly captured by models.

Within two decades, the carbon price will need to almost triple in real terms to $US82-$US260 a tonne, the two researchers say in their paper to be published in The Economic Journal.

The authors modified the main model used by economists since 1991 to assess the likely effects of climate change. Developed by Yale Professor Bill Nordhaus in 1991, the model has served as a basis for damage estimates, including the recent Fifth Assessment Report by the UN’s Intergovernmental Panel on Climate Change.