During transformation of the Polish economy Krakow's development was associated with several important programs complying with sustainable development standards. One of them was the program for reduction in the so-called low emissions and rationalisation of heat supply, whose one of participants was ECKSA. In May 1998 ECKSA became the first privatised company in the Polish power sector and the French concern Electricité de France (EdF) became its strategic investor. Sustainable energy development is a major goal of EdF which has already furnished its "Agenda 21" for this purpose. The EdF's participation in ECKSA's development is a guarantee for Krakow that the procedures to be adopted will comply with Agenda 21. This paper reminds IEA's projections concerning world energy needs and especially the huge increase in electricity demand and the emissions involved. Future quotas and emission trading mechanisms for CO2 are being implementing by EU (Marrakech 2001). Future demand for energy in Poland, and especially in the area of Krakow, is presented from the Polish government's point of view and according to municipal projections up to 2020. The use of primary energy, as foreseen for the country with deposits of gas and coal is also discussed. In light of this context and considering the future demand for both heat and electricity, the paper discusses how Poland is implementing the new environmental standards, which will have to be respected at the time of joining European Union around 2004-2006. SOx, NOx and dust emissions from Large Com- bustion Plant (LCP), now defined in EU directive for Large Combustion Plants (LCP), could have a major impact on Polish energy sector. As most large cities in Poland are equipped with district heating systems, advantages of large CHP plants are then considered. It is also discussed how new equipment for distributed cogeneration can contribute to the reduction of emissions. The paper also discusses future research needs concerning these technologies in the light of the previous context and considering the energy and environment competitiveness of either centralised or decentralised CHP plants. Considering the continued use of coal, which is expected to remain economically competitive for the next decades, the paper discusses different possibilities of adjusting environmental standards concerning sulphur and dust emissions. This analysis has also to take into account the use of by-products. Two technologies are possible: either Pulverised Coal (PC) with Flue Gas Treatment (FGT) or Circulating Fluidised Beds (CFB). Both of them could use either sub- or super-critical steam conditions to get higher energy efficiency. On the other hand, when natural gas is used as fuel, the Combined-Cycle (CC), which combines steam and gas turbines, is the most competitive technology. For a later future, say after 2020, coal gasification could also become competitive as regards CO2 capture and sequestration would be needed. In such a case the reference technology could be the Integrated Gasification Combined Cycle (IGCC).