Many economic assessments of the climate crisis “grossly undervalue the lives of young people and future generations”, Prof Nicholas Stern warned on Tuesday, before the Cop26 climate summit in Glasgow.

Economists have failed to take account of the “immense risks and potential loss of life” that could occur as a result of the climate crisis, he said, as well as badly underestimating the speed at which the costs of clean technologies, such as solar and wind energy, have fallen.

Stern said the economics profession had also misunderstood the basics of “discounting”, the way in which economic models value future assets and lives compared with their value today. “It means economists have grossly undervalued the lives of young people and future generations who are most at threat from the devastating impacts of climate change,” he said. “Discounting has been applied in such a way that it is effectively discrimination by date of birth.”

Youth protests around the world, sparked by the school strike of Greta Thunberg, have been a key factor in increasing demands for action in recent years, along with rising extreme weather events. Recent research shows people born today will suffer many times more extreme heatwaves and other climate disasters over their lifetimes than their grandparents.

However, Stern said: “The move to net zero [emissions] can be the great driver of a new form of growth – the growth story of the 21st century. This growth will be more resource-efficient, more productive, and healthier, and will offer greater protection to our biodiversity.”

Renewable energy costs have fallen dramatically and electric cars are moving to scale, he said, while 75% of global emissions are now covered by national commitments to net zero emissions by the middle part of century, though “some of those commitments are more credible than others”.

Stern’s remarks are based on a paper to be published in the Economic Journal of the Royal Economic Society and made to mark the 15th anniversary of the landmark Stern review on the economics of the climate crisis in 2006. It concluded that the costs of inaction on climate were far greater than the costs of action and that the climate crisis was the biggest market failure in history.

Since the publication of the report, carbon emissions have risen by 20% and Stern was scathing about much of the economic analysis that has informed policymakers. “Cavalier treatment of risk, and the missing of the very rapid technical progress, means the models have been profoundly misleading,” he said. The theory of discounting had not been related to its ethical foundations, he added, or allowed for the risk that global heating will make future generations poorer.

Political action has been slow since 2006, Stern said, because of the persistence of the “damaging” idea that climate action cuts economic growth and also because of the global financial crisis, which diverted attention and cut middle-class incomes, making politics more “fractious”.

“The economic question now is: how do we manage the radical transformation we have to make in the world economy in the next 20 or 30 years?” he said. “How do we promote the 2% or 3% extra investment we’ll need – which is a very valuable investment, not a cost.”

A whole range of policies are needed, Stern said, including carbon pricing, regulation, product standards, investment in research and reform of capital markets. A critical factor is the provision of large-scale, low-cost finance to fund the low-carbon transition, especially in developing countries.

Stern was directly involved in the negotiation of a promised $100bn a year in climate finance from rich nations in Copenhagen in 2009. But this has yet to be delivered and it is a vital goal of Cop26. On Monday, developed countries released a delivery plan to mobilise the funding, projecting the goal would be surpassed in 2023 onward, after being nearly attained in 2022. Nick Mabey at the E3G thinktank said it was “just about credible”.

The Stern review was criticised by some when published as exaggerating the risks of the climate crisis. “The idea that I was alarmist is just laughable in retrospect. We underestimated the dangers. The costs of inaction were very worrying 15 years ago – they are immensely worrying now.”