The Energy Security and Green Economy Bill announced yesterday will enable property owners to take out long-term, low interest loans to pay for measures such as loft lagging and double glazing.
The Department for Energy and Climate Change (DECC) said the loans will be secured against buildings rather than individuals, meaning they will be transferred to new owners if the house is sold. Annual repayments will be fixed at rates lower than the expected yearly saving on the property's energy bills, with the home owner pocketing the difference.
DECC Secretary Chris Huhne said: "Energy security and taking real action to tackle climate change aren't add-on extras for this new Government, but are vital to our national interest. The Energy Bill is designed to help consumers put a stop to wasting energy in their homes while making sure our energy system is fit for the 21st century."
The "Green Deal" work is expected be undertaken by well-known firms such as B&Q and Marks & Spencer.
Paul King, chief executive of the UK Green Building Council, said this would overcome a key hurdle to improving energy efficiency.
"The biggest barrier preventing home owners carrying out low-carbon refurbishment is the upfront cost of the measures. The 'Green Deal' will help overcome that problem by leveraging private sector investment – vitally important in this time of public sector spending cuts."
But other previously-announced policies may not make the bill. DECC would only say measures such as the establishment of a Green Infrastructure Bank to help fund environmental projects, tighter power station regulation, an electricity "smartgrid" and energy market reforms "may" be included.