The prediction by the United Nations Environment Programme (UNEP) that developing countries may need up to $500bn a year by 2050 to adapt to the ravages of climate change, is a wake-up call.

The forecast has dwarfed previous estimates from the UN’s top climate science body, the Intergovernmental Panel on Climate Change, which had projected adaptation costs in developing countries to reach $70-100bn per year by 2050, based on World Bank figures from 2010.

But the new UNEP report said this was likely a “significant underestimate”, even if global warming can be limited to 2°C this century – which many scientists say is unlikely.

Released last Friday during a crucial round of climate talks in Lima, Peru, the first UNEP Adaptation Gap Report serves as a preliminary assessment of global adaptation gaps in finance, technology and knowledge, and lays out a framework for future work on better defining and bridging these gaps.

The report finds that, despite adaptation funding by public sources reaching $23-26bn in 2012-2013, there will be a significant funding gap after 2020 unless new and additional finance for adaptation is made available.

Without further action on cutting greenhouse gas emissions, as outlined in UNEP’s Emissions Gap Report 2014 released in early November, the cost of adaptation will soar even further as wider and more-expensive action is needed to protect communities from the intensifying impacts of climate change such as drought, floods and rising sea levels.

The Adaptation Gap Report underlines the importance of including comprehensive adaptation plans in the agreement, as pointed out by Achim Steiner, executive director of UNEP and Under-Secretary-General of the UN.

The impacts of climate change are already beginning to be factored into the budgets of national and local authorities. The escalating cost implications on communities, cities, business, taxpayers and national budgets merit closer attention as they translate into real economic consequences, he explained.

National authorities and the international community should take the necessary steps to ensure the funding, technology and knowledge gaps are addressed in future planning and budgeting.

Of particular concern are the implications on least developed countries, whose financial resources for investing in development will need to be redeployed to financing adaptation measures.

The Adaptation Gap Report, produced in collaboration with 19 leading institutions and research centres, expands upon the earlier estimates by including new national and sector studies in its analyses and modelling.

The costs are based on the assumption that further wide-ranging action is taken to cut emissions to the level required to meet the target of limiting global temperature rise this century to 2°C compared to pre-industrial levels.

UNEP’s Emissions Gap Report 2014 found that in order to limit global temperature rise to 2°C and head off the worst impacts of climate change, global carbon neutrality should be attained by mid-to-late century.

If not, global greenhouse gas emissions could rise to up to 87 gigatonnes CO2 by 2050, far beyond the safe limits, and bring an increased need for spending to adapt to the consequences of a rapidly warming world. Under this scenario, adaptation costs could hit double the worst-case figures.

To quote Steiner further: “Debating the economics of our response to climate change must become more honest. We owe it to ourselves but also to the next generation, as it is they who will have to foot the bill.”