Industrial sector is the world’s largest energy end consumer. In European Union energy consumption for industry constitutes 25.6% of total final energy consumption. Therefore, several EU Directives have been developed and adapted to determine the energy efficiency targets for energy efficiency improvement in industrial sector. In Latvia industrial sector is the third largest energy consumer, accounting for 18% of total energy consumption. In addition, it is expected to promote the productivity growth of manufacturing sector at the national level, which also will increase the demand for energy. Therefore, it is necessary to develop and implement policy instruments to promote energy efficiency improvements in industrial sector to ensure the production of products with less energy thus promoting the competitiveness. The aim of the disertation is to assess the current situation in the field of energy efficiency in industry in Latvia, and to develop a methodology for modeling energy effiecincy policy instruments in industry. The objectives of the disertation are to study the existing laws, regulations and requirements, energy consumption and energy cost for industry, as well as to identify the right energy policy instruments to promote energy efficiency in industry. In addition, also barriers for implementation of energy efficiency measures in manufacturing companies were situdied. Based on the research results, a methodolody is prepared and a target industry (beer industry) is defined. The methodology is aprobated on the particular industry where in – depth analysis is done, the changes in energy efficiency are evaluated, and the energy saving potential is determined. Taking into account the methodology a system dynamic model is established. With the model it is possible to predict changes in energy efficeincy in beer industry, and to evaluate if the targets set for energy policy instruments could be achieved. The developed proposals, obtained results and the established system dynamics model during the prepration of disteration, can be applied for policy – makers, industry associations and manufacturing companies. It can be used to develop and evaluate energy efficiency policy instruments for industry.