Cities all around the world are faced with a rapid increase of urban population, and their crucial sustainable development issue becomes energy management. Moreover, the national energy management sector is slowly passing from government surveillance to the responsibility of local municipalities. The energy efficiency management in cities helps local governments to focus on important energy projects that have strong environmental aspects and financial feasibility. This paper analyzes the public lighting energy management in the Croatian city of Rijeka in order to determine the connection of the energy market liberalization and sustainable development in urban areas. Research results indicate a significant connection between investments in energy management of public lighting and its influence on lower emissions of carbon dioxide (CO2) (C) 2010 Elsevier Ltd. All rights reserved.