Estonia as a case study allows understanding energy efficiency improvements and how they can occur in a former Soviet economy. The structure of energy consumption by end-use sector is analyzed and a picture of energy-efficiency potentials and policies emerges from this analysis, from international comparisons and from extensive in-country experience. The potential for improvements is enormous, and key priorities are district heating systems, buildings and low-cost measures in industry. Economic reform and structural economic changes will drive improvements in industry and transport, while public policies and intervention are needed in heat supply and the residential sector. Key barriers to efficiency improvements include lack of ownership, lack of capital, low electricity prices, inexperience with cost minimization and financial analysis, and lack of meters and controls, especially in the residential sector.