Danish government proposals on Friday called for sourcing just over half of its electricity from wind turbines by 2020 and all of its energy from renewable sources in 2050.
The government also invited the parties in parliament to negotiations on the proposal to shape energy policy to 2020.
Denmark will take over the presidency of the European Union for six months from January 1 and aims to promote ambitious climate and energy goals for Europe.
It is already the world leader in wind power, getting a fifth of its power from wind turbines.
"This is an historical effort to become even better at saving energy and create an even more competitive and energy-effective company culture in Denmark, also for households," Minister for Climate, Energy and Building Martin Lidegaard said.
The portion of Denmark's electricity from wind and other renewables would rise to 52 percent by 2020 under the new plan, topping a 50 percent target in a government policy programme adopted last month.
Despite Denmark's green credentials in wind energy, the country has virtually no hydropower and no nuclear installations, making it still heavily dependent on coal.
In 2010, coal accounted for nearly 44 percent of total Danish power generation and fossil fuels altogether for two thirds, while renewables accounted for one third.
The government's proposal called for coal-fired power plants and oil-fired heating to be phased out by 2030. Coal heating, which now accounts for 11 percent of the total heat supply, would be replaced by biomass.
Lidegaard told foreign journalists the plan to phase out fossil fuels amounted to buying an insurance policy "against the risk of the market in the next 10 years".
"The conclusion being it has a cost to make a green transformation, but it also has a cost not to do it," Lidegaard said. "I think this will work out to be the best insurance Denmark has ever (bought)."
The government estimated that its plan would cost 5.6 billion crowns ($1.0 billion) in additional spending in 2020.
"Not included in that figure are the billions of crowns businesses and households are projected to invest in renewable energy and more efficient technologies," the climate, energy and building ministry said in a statement.
The government did not give an estimate for what companies and households would need to invest for the transformation.
Under the plan, 100 percent of Denmark's power and heat would come from renewable energy by 2035, the ministry said.
By 2050, the entire energy supply — electricity, heat, industry and transportation — would come from renewables, according to the proposal.
The initiatives would cut Denmark's greenhouse gas emissions by 35 percent by 2020 based on 1990 levels.
Lidegaard said that Denmark faced three global crises which will hit it "with a force that is so far absolutely unheard of" — an economic and financial crisis, a climate crisis and a resources crisis. "This proposal will address all three crises."
The push for renewable energy would position Denmark as a leader in developing climate-friendly technology, he said.
Lidegaard said on Thursday at an energy council meeting in Brussels that energy efficiency would be a priority for the Danish EU presidency.
On Friday, he said that his message to other EU member states would be that the investment in green energy can pay off.
"That is what I will say to my colleagues in the EU in the next half year," he said. "I actually think that there is money in this." ($1 = 5.5818 Danish crowns)
