To address the severe effects of climate change, Latvia has committed to achieving climate neutrality by 2050. To do this, it is necessary to introduce policy instruments and measures that achieve climate targets while ensuring the lowest possible total costs. In the Doctoral Thesis, an energy system modelling tool was adapted to the Latvian context. This improved tool enables the assessment of policy instruments and measures to achieve climate neutrality by modelling and analysing the national energy sector. The most modern technology database was integrated into the model during the Thesis’s development process. The impact of policy instruments on achieving climate neutrality was analysed, and optimisation was conducted to identify the energy production portfolio that enables Latvia to meet its climate neutrality goals at the lowest possible total costs. The Thesis is based on six scientific publications. The results support decision-making at the state, municipal, and company levels.