Development and its sustainability are the main elements helping to build a better future by satisfying humans’ present needs and considering future needs of future generations. Sustainable development is based on three main pillars – environmental, economic and social. Environmental dimension focuses on decreasing negative impacts of using natural resources and energy while providing the necessary to satisfy a society’s needs and is considered as one of the basic elements of sustainable development policy. Effective, successful and sustainable development must cover every governance level starting from local to global. Planning processes of local municipality assist significantly by providing necessary information and education in terms of sustainable development. The Climate Action Plan of United Nations stresses on the importance of local municipalities and their involvement in sustainable development of urban environment. Current research is aimed at analyzing Sustainable Energy Plan and Climate Action Plan in urban environment of Latvia and developing and approbating the local sustainable environmental policy improvement matrix. The analysis of energy action and climate action plans developed by five municipalities of Latvia has helped to identify the main criteria for the local government plan of urban environment and sustainable energy. Therefore, the authors of the research have established eight categories of criteria: institutional dimension; structure of the plan; description of the current state of the energy sector in a region; quality of the input data of the emission calculation; adaptation of the energy sector to climate change; targets set; measures set and monitoring. Altogether it includes 71 criteria. The aim of the plan is to find better ways and tools to improve local environmental policy in urban environment as well as in Latvia, thus reaching the 2030 goal of the EU – to decrease greenhouse gas emissions by 55% compared to 1990. Taking into account the identified criteria, a sustainable environmental policy assessment tool was developed, which can be used to assess the energy action plans developed by a municipality. The study performed verification and validation of the developed tool, using it for the evaluation of nine Latvian municipalities. Municipalities have a wide range of tools at their disposal for the implementation of local sustainable development policy, from development planning documents and action plans to Institute of Civil Engineering and Real Estate Economics 21 direct investments in infrastructure improvement. However, many municipalities face barriers to apply these tools, such as lack of knowledge, motivation and/or capacity.