The potential environmental benefits of utility-based cogeneration are examined, using the energy system in Ontario, Canada, as a case study. Data are presented regarding fuel cycle emissions, environmental and health effects, and associated economic costs of the existing provincial energy system, as a basis for comparison to a more efficient energy system with utility production of useable steam and hot water. Estimates are presented of reductions in emissions, effects and environmental and health costs that could be achieved by the improved system. Costs associated with mortality, morbidity, lost work days, lost crop yield, lost fish yield and building damage are considered. The analysis suggests that utility cogeneration could reduce these costs by 10 to 45%, depending on the cogeneration scenario.