The paper describes the government and municipalities’ buildings, policy instruments and financial feasibility analysis, created system dynamics model and use of parameters to change the behaviour of the system. The aim of this research is to outline the dynamics under the market of energy efficiency in both municipality and state owned buildings. A system dynamics approach has been used to show short and medium term impact on municipal and government owned building energy efficiency and the changes which are made by using policy instruments. By the year 2016 the estimated savings set in Latvian energy efficiency action plans will not be reached but by 2020, these goals will be achieved.