While greenhouse gas (GHG) emissions per capita are relatively low, Hungary is releasing high levels of greenhouse gases relative to the size of the economy, reflecting inefficient use of energy. Efforts to raise energy efficiency constitute an important policy option to reap multiple benefits: (i) reduced reliance on energy imports; (ii) reduction of GHG emissions (energy production and use contribute most GHG emissions in Hungary); and, (iii) reduced air pollution and related health impacts. With an average 3% per year the reduction in energy intensity over recent years in Hungary has been impressive. The question is whether this rate of improvement, mainly due to significant changes in Hungary’s industrial structure, can be continued without stronger energy efficiency policies. In the longer term (post 2012), more stringent climate policy objectives (in the European Union context) will generate additional incentives to harness cost-effective energy efficiency potentials in many sectors of the Hungarian economy. OECD analysis shows that large reductions in GHG emissions are achievable at relatively low costs if the right policies are put in place. It is suggested that Hungary considers: (i) stronger use of market-based instruments; (ii) better integration of GHG emission objectives in relevant policy areas such as power supply, transport, and residential energy use; and (iii) cost-effective measures to speed technological innovation and diffusion of renewable energy.