Tesco unveiled plans for the "greenest store in the world" today as it set up a �100 million environmental fund. The supermarket chain plans to build a store in Aylsham, Norfolk, which will be made entirely out of recyclable materials such as wood and recycled plastics.

It also pledged to cut the amount of energy it uses in its stores in half by 2010 compared with its consumption levels in 2000.

It said it will use wind turbines and solar panels alongside geothermal power and gasification, which turns waste into clean and sustainable power, as it looks to deliver "a huge reduction in carbon emissions".

The proposed supermarket in Aylsham follows on from two "model energy stores" in nearby Diss and Swansea which use less energy than other Tesco stores thanks to clear roofs to maximise natural light, wind turbines to power the tills, and cold air from chilled areas for air-conditioning.

The environmental fund was announced as Tesco banked record profits of £2.21 billion today.

Chief executive Sir Terry Leahy insisted the fund was not a gimmick to improve the image of the company. "Well, it's a big investment," he said. "£100 million is not a PR stunt."

Sir Terry said it was "a very interesting and potentially very important development". "Everyone is concerned about energy, about carbon, about energy security. The cost of energy has gone up for everybody and Tesco is no exception. We've had to deal with huge rises in energy costs in the last year so, of course, this has really stimulated within the business a search for alternatives."

Tesco also said it would continue to cut carbon emissions from its vast distribution fleet and added that there would be further investment in recycling schemes for its customers. Chief financial officer Andrew Higginson said the moves were necessary with oil prices touching record levels of around 70 US dollars a barrel. He said: "It brings into play schemes which would otherwise be uneconomic at 25 US dollars a barrel. It is a genuine attempt to listen to customers and their concerns, coupled with economic reality."

Meanwhile, Tesco underlined its dominance of the retail sector today by reporting annual profits of £2.21 billion - a jump of almost 17% on a year earlier. The latest improvement included a 10.7% rise in total sales at its UK stores, even though the company said it had been a "more challenging year". Tesco also revealed plans to boost its firepower by raising up to £5 billion from the reorganisation of its property portfolio over the next five years.