It is increasingly recognised that the energy renovation of the existing building stock will be determinant for achieving 2030 and 2050 decarbonisation targets in Europe. As operational energy is being dramatically reduced through regulatory efforts and funding from the European Union, the relevance of the environmental performance of these interventions becomes higher, namely regarding embodied energy and carbon emissions associated with the materials that compose the renovation solutions. Although some studies address these impacts in buildings, the range of studies focusing on the neighbourhood scale is limited. This article presents a methodological framework combining a life cycle cost assessment (LCC) and a life cycle assessment (LCA). The purpose is to assess the relevance of embodied energy and carbon emissions on the cost-effectiveness of building renovation solutions towards nZEB at the neighbourhood scale by comparing an operational energy approach and a whole life cycle approach in a case study of a social housing neighbourhood in Braga, Portugal. The results suggest an increase in indicators values demonstrating a negative impact on the achievable reduction of both energy and emissions when the whole life cycle approach is considered, which can constitute a critical point for policy formulation in the decarbonisation of the built environment.