The current state of the Greek energy system is analysed together with alternative energy policies. A by sector analysis provides an overview of the inputs that have been used for this investigation. A combination of a demand forecast performed together with an analysis based on the R-MARKAL and WASP IV models give an evaluation of the alternative policies to be applied and a determination of additional measures required in order to achieve the Kyoto targets. Three scenarios are developed, depicting the evolution of the Greek energy system under alternative policies, taking into consideration medium and high oil prices. Incremental investments and differential costs are then calculated between Kyoto and non-Kyoto scenarios and they are compared to emission permits costs. (C) 2003 Elsevier Ltd. All rights reserved.