Despite the substantial efforts made to develop sound energy efficiency policies, the desired effects in terms of achieved energy savings are lacking. The phenomenon is known as energy efficiency gap and its persistence was the main driver of this research. The aim of the research was to examine the causes and propose solutions for bridging the gap. Therefore, ideal policy making cycle is defined connecting design, implementation and multiple criteria evaluation of policy instruments’ impacts in closed, repetitive loop. Concept of energy efficiency market was introduced as a basis for policy making, enabling better understanding of the overall environment where policy needs to be implemented. Established methodology for energy efficiency market assessment includes upgraded barrier model, use of conservation supply curves for evaluation of energy saving potential and determination of consumers’ willingness to pay for energy savings. Following the market assessment, the framework for design of policy instruments and measures is established. It uses theory-based approach to provide the insight in the supposed operation of an instrument or a measure and integrates evaluation of impacts already in the design phase. A method for evaluating time dependency of impacts, based on the diffusion of innovation theory, is proposed. Finally, methodology for evaluation of policy instruments and measures according to criteria that go beyond energy savings is proposed. In the variety of analysed multi-criteria decision making methods, Analytical Hierarchy Process is suggested to be streamlined in the policy cycle. The method is suitable for prioritization of policy instruments and measures, which forms a basis for decision making on allocation of limited resources for their implementation. Applicability of proposed solutions for enhancing energy efficiency policy making is demonstrated through the assessment of Croatian energy efficiency market and design and evaluation of policy instruments and measures for residential sector.