The potential role of photovoltaic technologies in reducing carbon dioxide (CO2) emissions in the USA was evaluated using an energy–environment–economic systems model. With a range of assumptions about future scenarios up to 2030, the model results provide an objective quantitative assessment of the prospects for photovoltaics in a competitive market. With the projected improvements in cost and efficiency, photovoltaics will compete favorably as a general source of electricity supply to the grid by about 2010 in southwestern USA. This analysis indicates that photovoltaics has the potential to reach a total installed capacity of 140 GW by the year 2030, and to displace a cumulative 450 million metric tons of carbon emissions from 1995 to 2030. At the projected 2030 capacity, photovoltaics could displace over 64 million metric tons of carbon emissions a year. Under constraints on carbon emissions, photovoltaics becomes more cost effective and would further reduce carbon emissions from the US energy system. © 1997 John Wiley & Sons, Ltd.