40% of European Union energy consumption is produced from buildings. European Union has developed an energy and climate change package with the main goals to reach by 2020 and there are two main directives which regulate energy efficiency for the public sector. Different planning documents show increasing goals in the field of energy efficiency. The paper describes the government and municipality buildings, policy instruments and financial feasibility analysis, created system dynamics model and use of different 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 municipal 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. Results show that by 2016 the estimated savings of Latvian energy efficiency action plans will not be reached but by 2020 the goal will be achieved.