Australia, like the US, has refused to ratify the Kyoto agreement, but is set to face increasing pressure to do so in the light of a new hard-hitting study.

A report by former World Bank economist Nicholas Stern warned of severe problems if global warming was ignored.

If there was no action now, he said, the world would face a huge depression.

The UN has also just released new data showing that rich countries have made little overall progress in reducing the production of gases blamed for global warming.

But Mr Costello said the claims had to be kept in perspective, and he insisted that Australia was on track to reduce its emissions.

'Significant challenge'

"There's no point in Australia meeting its emissions target if you're going to have major emitters such as China and India, which are increasing every year their emissions by more than the total of Australia's," Mr Costello told reporters.

He denied claims made by the Stern report that global warming was the greatest market failure the world had seen.

"It will be a significant challenge over the course of this century. But it's not on a scale of unprecedented challenges," he said.

He added that if Australia closed down all its power stations today, China would probably replace them in one year.

Australian Resources Minister Ian Macfarlane backed him up, saying that Australia was on track to meet its Kyoto Protocol target anyway, and did not need to sign the agreement.

He told Australian TV: "The sort of things that Sir Nicholas Stern is saying has to be done in the Western world are already being done here in Australia."

"Australia will be the only country in the world without nuclear energy that will reach the Kyoto target."

But Opposition Labor Party leader Kim Beazley said that if he came to power he would sign the Kyoto agreement.

BBC News