According to national press report the new department will take on responsibilities formerly split between the Department for the Environment, Food and Rural Affairs (Defra) and the Department for Business, Enterprise and Regulatory Reform (Berr).
Ed Miliband will step up from his role as Cabinet Office Minister to the role of Secretary of State for Energy and Climate Change.
Peter Mandelson has been controversially appointed as business secretary.
Mr Miliband said: 'I am looking forward to the responsibility of running the new Department of Energy and Climate Change and working with colleagues across government, including in particular Hilary Benn, who has led Britain's work on climate change with skill and dedication.
'The new department reflects the fact that energy policy and climate change are directly linked.
'My job is to make sure our policy on climate change is fair for ordinary families and our policy on energy is sustainable for future generations.
'We will do all we can to ensure affordable fuel bills for people, put Britain at the forefront of creating green jobs and play our part in ensuring every country meets the climate change challenge.
'Climate change cannot be tackled by politicians on their own but through politicians and people working together. I look forward to playing my part.'
The Renewable Energy Association has welcomed Mr Milliband's appointment.
Philip Wolfe, REA director general, said: “We are delighted that the Government has acted on our suggestion that energy now needs its own department and cabinet minister.
“We have been calling this for some time, most recently in our submission last week to the Renewable Energy Strategy.”
Mr Wolfe said Mr Miliband would have to work hard to ensure the UK meets its tough renewable targets.
He said: “This will require Mr Miliband to extend the policy portfolio way beyond the narrow range considered by his predecessors.
“In particular we look forward to measures for renewable heat, which can be included in the renewable energy tariff being considered in the current Energy Bill.
“He also needs to overcome obstacles delaying renewable technologies like wind, bioenergy and marine renewables, and to adopt a more robust approach to renewable transport fuels and decentralised energy technologies like solar energy and heat pumps.
“The REA and the wider industry will look forward to working with the new Secretary of State on these crucial issues.”