In this paper the energy payback time and CO2 emissions of photovoltaic (PV) system have been analyzed. The embodied energy for production of PV module based on single crystal silicon, as well as for the manufacturing of other system components have been computed at macro-and micro-level assuming irradiation of 800-1200 W/m(2) in different climatic zones in India for inclined surface. The energy payback time with and without balance-of-system for open field and rooftop has been evaluated. It is found that the embodied energy at micro-level is significantly higher than embodied energy at macro-level. The effect of insolation, overall efficiency, lifetime of PV system on energy pay back time and CO2 emissions have been studied with and without balance of system. A 1.2kW(p) PV system of SIEMENS for mudhouse at IIT, Delhi based on macro- and micro-level has been evaluated. The CO2 mitigation potential, the importance and role of PV system for sustainable development are also highlighted. (c) 2005 Elsevier Ltd. All rights reserved.