In countries where space heating demand is limited to a few months in the year, potentials for increasing the penetration of cogeneration (CHP) are strictly linked to sites where concentrated heat utilizations already exist. Hence the energy system will move towards a larger number of small-medium size CHP plants, which is herein named distributed cogeneration. Design criteria are analysed for plants in this context, from a technical and economical standpoint. A case study is reported, focused on the most suitable heat to work ratio. It is found that the pricing and tax systems, as they are stated by the domestic legislation, push the design point and the operating conditions yielding the best economy, into a range where CO2 emissions are remarkably higher than the least possible. (C) 2005 Elsevier Ltd. All rights reserved.