Integrated resource planning (IRP) as practised in the USA has no rationale in countries with a deregulated and competitive electricity market with third party access on the retail level and an unbundled business structure, Incentives for demand-side management (DSM) must come from other sources than IRP, and public authorities face a challenge to foster an environment which will encourage DSM, The principles of incorporating environmental externalities (EE) into decision making is one element from IRP that can be transferred into a competitive environment. This article describes a flexible methodology for doing this, A case study of England and Wales shows that an incorporation of EE to achieve environmental dispatch of power plants will not have any major effects on the current merit order or on the market shares of generators. The same study shows however that the approach will enhance the incentives for load management and energy efficiency.