New manifesto plans unveiled by the party would reward people who take action to boost energy efficiency with a council tax discount.
When reductions in gas and electricity bills are also taken into account, households could save at least £100 a year by adopting eco-friendly measures, according to the Lib Dems.
The party pointed out that household energy use has recently fallen by an average of 2.5 per cent a year, but stressed that “we need to go further and faster”.
Ed Davey, secretary of state for energy and climate change, said the best way to bring down household bills is to reduce them over the long term, which means reducing energy waste in the home.
He added: “A ten-year council tax cut will make action to end your home’s energy waste a no-brainer.
“to meet our legal climate change obligations, the cheapest way is to make rapid progress in cutting our emissions by saving the energy we now waste.”
Mr Davey also underlined the economic importance of efficiency, arguing that it will not be possible to build a stronger economy without environmental awareness and sustainability.
While the government is reportedly on track to meet its target of improving the energy efficiency of one million homes, the Lib Dems said their proposed tax incentive would allow substantial progress in the next parliament.
Recent initiatives to encourage efficiency in the home include the Green Deal Communities scheme, which offered funding for local authorities to help households install measures such as solid wall insulation and new heating systems.