Poland is one of the coal based countries, where abundant domestic reserves and limited access to other fuels created energy system with morę than 94% power generation from hard coal and lignite. Reduction of greenhouse gases emissions in such a system is a challenge. The bottom-up model of power and heat generation system was used to analyze paths of technologies development reąuired to comply with the expected carbon dioxide emissions reductions. The model considered power generation for various groups of consumers of flexible demand and limits on emissions for sulphur dioxide, nitrogen oxides and particulates. Taxes on carbon dioxide emissions or auctioned emission allowances were the mean for the reduction of CO2 emissions. Firstly, technologies changes were observed to define the prospects of coal based generation. Decomposition rnethod was used to identify the effects of technological processes, fuels structure, efficiency improvements and demand changes on CO2 emissions reduction. The effects indicate most efficient policy instruments to foster carbon dioxide emissions reduction.