This chapter looks at EU energy innovation policy, which is key to addressing many European policy ambitions. While traditionally much of EU energy (innovation) policy had been focused on supply side technologies, we are now seeing some increasing attention also given to innovation to reduce energy demand or increase energy efficiency. Even though both the ambition and number of EU policies has been increasing significantly, academic analysis of the role of such EU policies for innovation and deployment of energy efficiency technologies is scarce. In this chapter, we critically discuss the ways in which EU energy efficiency policy is driving innovation and technology deployment on the basis of a review of the existing literature on the issue. First, using market transformation theory we position the various EU policy instruments in energy innovation policy along the different stages of market transformation. Second, we identify key research challenges going forward, which include: (1) the role of EU energy efficiency policy within a multi-level governance structure; (2) the lack of institutionalisation of EU energy efficiency policy; (3) the need for more comprehensive policy evaluations; (4) the importance of better understanding real-world policy mixes; and (5) the potential for applying a socio-technical approach to energy efficiency in the EU. We conclude that the lack of an explicit innovation strategy for energy demand constitutes a barrier to achieving the ambitious EU energy efficiency targets. Furthermore, the conventional understanding of market transformation is unlikely to allow for the transition at the scale and speed required to make a significant contribution to mitigating climate change across the EU.