Portugal’s climate and energy policies are closely intertwined. Portugal is highly dependent on imported fossil fuels, which has stimulated diversification of the energy mix. The increased use of both natural gas and renewable energy sources is the main reason for the decline in greenhouse gas emissions since 2005. The challenge will be to sustain this reduction once economic growth resumes, with a view to achieving Portugal’s targets by 2020. Portugal has also actively supported energy efficiency and renewable sources, and it is poised to meet its ambitious renewable energy target. However, these policies should be assessed to ensure that they do not overlap with the EU Emissions Trading System, that energy prices reflect environmental costs, and that they are cost-effective. Portugal has introduced strong incentives to use more efficient vehicles and has developed ambitious plans to promote electric vehicles. Nonetheless, incentives to optimise decisions concerning car use could be further improved.