Experts are predicting a major increase in demand for so-called green IT solutions after the release of a major report on the economic impact of climate change that recommended the introduction of more green taxes and regulations.

The 700-page report, from former chief economist at the World Bank Sir Nicholas Stern, argues that man-made global warming will result in flooding and droughts that could cause a 20 percent collapse in the world economy, while acting now to limit climate change would cost just one percent of global GDP.

tern recommends governments act to develop a global market in carbon trading and put a clear cost on carbon - either through taxation or legislation - in order to correct the market failure that has allowed organisations to pollute without fully bearing the economic costs.

The government has endorsed the report and speculation is mounting that a raft of taxes on environmentally damaging activities are imminent. Chancellor Gordon Brown said green taxes would be part of a wider climate change programme, but a leaked memo from environment secretary David Milliband revealed the Treasury is being lobbied to introduce wide ranging levies such as road pricing, increased tax on air travel, and higher VAT on high energy electronic products.

Richard Barrington of Sun Microsystems predicted major changes were now inevitable. "With all three parties behind this Brown has a mandate," he said. "Expect to see the climate change levy being index linked and an extension of the emissions trading scheme, which will allow you sell carbon you don’t use."

Natalie Butler, UK sales manager at web conferencing specialist WebEx, said that the prospect of green taxes meant IT directors had to investigate steps they can take to help avoid the new levies.

Mike Davis of analyst Ovum agreed IT directors should act now to limit the financial impact. "Those companies that get it right now will have less financial pain," he said.

He added that IT directors should look to limit their carbon footprint by enhancing the energy efficiency of hardware through upgrades and use of virtualisation technolgies; redesigning datacentres to limit air conditioning; and deploying web conferencing tools. "Why did the [IT] world and his wife go to see Oracle in California last week?" he asked. "There has to be a better way of doing things."

However, critics have urged the government to introduce incentives alongside any new green taxes. "We want to see positive rewards for companies that do the right thing," said Barrington. "We'll be pushing the chancellor for tax credit for good behaviour."