Abstract There are reasons to believe that improved energy efficiency still is an important energy development policy, despite stable oil prices, abundant oil supplies and end of the Cold War. The political reasons are uncertainty of the current Gulf situation and prevalent wars in the former Eastern bloc countries. Increasing concern over global environmental problems, the existence of imperfect energy markets and the desire for rapid economic growth in developing countries are the other reasons. This paper analyses the effects of energy management policies on the Kenyan economy using a computable general equilibrium model. Simulations show that an increase in energy efficiency leads to reduced dependence on foreign energy sources, promotion of reliable domestic energy sources, promotion of conservation of all forms of energy, saves scarce foreign currency and preserves the environment.