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The debate over the most efficient way to manage the adversities of climate change has intensified over recent years. Regardless of whether there are formal emissions reduction policies in place, such as carbon taxes or emissions trading schemes, there is a clear focus on the promotion of less emissions intensive activities, particularly in the area of energy generation. Combined heat and power (CHP) systems are chosen for study, as they are a proven technology that is known historically for their low environmental impact in the energy generation sector. In this thesis, a methodology has been developed to thermo-economically optimise a CHP system for the purposes of reducing or eliminating the financial impact of carbon pricing policy. In order to complete the analysis, comprehensive economic modelling was undertaken to forecast the price of purchasing electricity, coal, natural gas, the feed-in tariff and the carbon price. One feature of the methodology developed is its ability to be applied to a variety of systems around the world using any prime mover, utility pricing, fuel (renewable and non-renewable) and carbon pricing policy. The prime movers considered include steam turbines, gas turbines, mircoturbines, and fuel cells. In addition to Australia's carbon price, systems were also studied operating within the constraints of the European Union Emissions Trading System, New Zealand's Emissions Trading Scheme, British Columbia's (Canada) Emissions Trading Scheme, and California's (USA) Emissions Trading Scheme. Net present worth and payback period were the economic indicators employed to assess the potential of the systems. The methodology was demonstrated by sizing the system for different case studies. Finally, sensitivity analyses were performed to gauge the extent the economic assumptions contributed to the predicted outcomes.