State-controlled power monopoly Korea Electric Power Corp. (KEPCO) and several other state-run companies agreed to spend a combined 1.1 trillion won ($1.09 billion) on developing renewable energy from 2006 through 2008, the Ministry of Commerce, Industry and Energy said in a statement.

"The agreement aims to better cope with the rapidly changing global energy environment amid soaring oil prices and the ratification of the Kyoto Protocol," the ministry said.

Energy-deficient South Korea, which is extremely vulnerable to rises in oil prices as it has to import all its crude oil needs, is also joining the move to reduce its oil use and meet tightening global standards on the environment.

In 2004, renewable energy including solar and wind energy, hydro-electric power and farm-produced fuel made up just 2.3 percent of South Korea's total energy mix, well below that of oil, gas, coal and nuclear power.

Renewable energy accounted for 13 percent of Denmark's mix and 6.2 percent in France, the ministry said.

But analysts have said global efforts to boost consumption of alternative fuels have a long way to go before putting a small dent in worldwide demand for fossil fuels.

The ministry said the three-year investment was expected to produce 210,000 tonnes of oil equivalent (TOE) renewable energy, equivalent to 1.59 million barrels of crude oil.

That figure would account for just 0.2 percent of the country's annual petroleum demand.

It added the project should cut emissions of greenhouse gases by a total of 170,000 tonnes over the three years, or 0.12 percent of the country's total emission of the gases last year.