Abstract In this paper the GHG mitigation potential of a power system with prevailing use of lignite is assessed through the example of the Macedonian power system. The analysis is conducted using the WASP model in order to develop three different scenarios (business as usual – BAU and two mitigation scenarios) for the power system expansion over the period 2008–2025. In the first mitigation scenario two gas power plants with combined cycle are planned to replace some of the lignite-based capacities. The second mitigation scenario, besides the gas power plants, assumes electricity consumption reduction related to the large industrial consumers and an increased share of new renewable energy sources. Detailed calculations of the GHG emissions are made for all scenarios. The comparison of emissions in 2025 and in 2008 shows that the increase of 78% in the case of predominantly lignite BAU scenario is reduced to 41% by the first mitigation scenario, and to 14% by the second mitigation scenario. The mitigation costs appeared to be less then 10 $/t CO2-eq for the first mitigation scenario, and even negative for the second one.