This paper discusses the role of energy efficiency and conservation in reducing environmental impact, particularly in addressing climate change. Energy efficiency is defined as improving the efficiency of energy use to provide a certain product or service, while energy conservation refers to reducing energy demand. The paper argues that although energy efficiency has significant environmental and economic benefits, the level of investment in it is often insufficient. This is attributed to various market failures and barriers, including low energy prices, high investment costs, uncertainty, information asymmetry, bounded rationality, slow technology diffusion, principal-agent problems, and imperfections in capital markets. The paper also addresses the rebound effect, which refers to the phenomenon where improvements in energy efficiency may lead to increased energy demand due to factors such as price effects, income effects, and macroeconomic effects. The paper emphasizes that while energy efficiency is important, its effectiveness can be limited by the rebound effect, and therefore, policies should aim for real energy savings rather than just efficiency improvements. The paper reviews various policy instruments for promoting energy efficiency, including technological standards, tradable white certificates, taxes, subsidies, and information policies. It argues that economic instruments such as taxes and tradable white certificates are generally more effective than standards or subsidies in promoting energy efficiency. However, a combination of policies may be necessary to address different market failures and barriers. The paper concludes that energy efficiency policies should be considered as means to an end rather than an end in themselves. They should be used to achieve broader socio-economic and environmental objectives, such as reducing carbon emissions and energy dependence. The paper also emphasizes the importance of avoiding the confusion between efficiency and conservation, and highlights the need for policies that target real energy savings rather than just efficiency improvements. The paper calls for further economic analysis of the effectiveness and efficiency of energy efficiency policies to design the most appropriate measures for promoting energy savings.This paper discusses the role of energy efficiency and conservation in reducing environmental impact, particularly in addressing climate change. Energy efficiency is defined as improving the efficiency of energy use to provide a certain product or service, while energy conservation refers to reducing energy demand. The paper argues that although energy efficiency has significant environmental and economic benefits, the level of investment in it is often insufficient. This is attributed to various market failures and barriers, including low energy prices, high investment costs, uncertainty, information asymmetry, bounded rationality, slow technology diffusion, principal-agent problems, and imperfections in capital markets. The paper also addresses the rebound effect, which refers to the phenomenon where improvements in energy efficiency may lead to increased energy demand due to factors such as price effects, income effects, and macroeconomic effects. The paper emphasizes that while energy efficiency is important, its effectiveness can be limited by the rebound effect, and therefore, policies should aim for real energy savings rather than just efficiency improvements. The paper reviews various policy instruments for promoting energy efficiency, including technological standards, tradable white certificates, taxes, subsidies, and information policies. It argues that economic instruments such as taxes and tradable white certificates are generally more effective than standards or subsidies in promoting energy efficiency. However, a combination of policies may be necessary to address different market failures and barriers. The paper concludes that energy efficiency policies should be considered as means to an end rather than an end in themselves. They should be used to achieve broader socio-economic and environmental objectives, such as reducing carbon emissions and energy dependence. The paper also emphasizes the importance of avoiding the confusion between efficiency and conservation, and highlights the need for policies that target real energy savings rather than just efficiency improvements. The paper calls for further economic analysis of the effectiveness and efficiency of energy efficiency policies to design the most appropriate measures for promoting energy savings.