In this paper, the exergy interactions, environmental impact in terms of CO2 mitigation, and the economics of small-capacity concentrated solar power-driven heat engines for power and heat generation are analysed for residential applications. Starting from a base case study that assumes mass production in Ontario, it is shown that the investment in such a system, making use of a heat engine and having 9?m2 of aperture area, could be about CN$10 000 for a peak electrical efficiency of 18% and thermal efficiency of 75%. The average CO2 mitigation due to combined savings in electricity and heat is similar to 0.3kgCO2 kWh-1, a figure 34 times larger than for photovoltaic panels. If 25% government subsidy to the investment is provided, the payback period becomes 21.6 years. Additionally, if the financing benefits from a feed-in-tariff program (at 25% electrical sell-back to the grid) and deductions from CO2 tax are realized, then the payback time drops to 11.3 years. These results are obtained for a conservative scenario of 5.5% annual incremental increase in energy price. For the moderate consideration of all factors, it is shown that within the financial savings over the entire lifecycle, 7% are due to carbon tax, 30% are due to electrical production and the largest amount, 63%, is the result of reducing the natural gas heating capacity with solar heating from the proposed system. Copyright (C) 2011 John Wiley & Sons, Ltd.