Norway is setting up a $3.24 billion fund to promote renewable energy such as wind and hydropower while spurring energy savings.
The Norwegian government said the cash would help the country achieve a goal of raising available power from renewable energy sources to 25 per cent of total demand by 2016.
"Bioenergy, windpower, hydropower, and energy efficiency will contribute to new possibilities, new jobs and new optimism over the whole country," Oil and Energy Minister Odd Roger Enoksen said in a statement.
The fund would be managed by state energy firm Enova.
Under the scheme, Enova would strengthen infrastructure for district heating, stimulate energy efficiency and renewable energy in households and set up a deposit scheme to encourage scrapping of oil boilers.
Norway needs to promote renewable energy use partly because its emissions of heat-trapping carbon dioxide, mainly from burning oil, were far above target and about 9 per cent above 1990 levels in 2005.
Under the UN's Kyoto Protocol on curbing global warming, Norway has to limit any rise in emissions to no more than one percent by 2008-2012 compared to 1990 levels.
That goal is hard to reach because fossil fuel use is rising in Norway, the number three oil exporter behind Saudi Arabia and Russia. Norway generates almost all its energy from hydropower and has few rivers left to dam.