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This dissertation seeks to contribute to the policy discussion on how to design efficient and sustainable energy policies. It applies microeconomic theory and empirical analysis to identify three market failures in European energy markets and to evaluate specific policy measures that strive to overcome them. Chapter 1 applies a theoretical model to study the effect of different renewable energy subsidies on producer strategies and competition in wholesale electricity markets. Chapter 2 empirically quantifies different reasons for switching inertia in the retail electricity market using a structural discrete choice model and evaluates policy measures that seek to overcome inertia. Chapter 3 empirically analyses the effect of a European policy that mandates the use of energy performance certificates aiming at establishing an efficient market for energy efficient rental property. JEL classification: L13, Q48, L97, Q42, D83, D82, D12, C21