Because of the global warming impact of HFCs, the use of natural refrigerants has received worldwide attention. Efficient use of refrigerants is of pressing concern to the present automotive and HVAC industries. The natural refrigerant, carbon dioxide (CO2), exhibits promise for use in automotive air conditioning systems, in particular the transcritical CO2 refrigeration cycle. The objective of this work is to identify the main factors that affect CO2 system performance. A second law of thermodynamic analysis on the entire CO2 refrigeration cycle is conducted so that the effectiveness of the components of the system can be deduced and ranked, allowing future efforts to focus on improving the components that have the highest potential for advancement. The analysis reveals that the compressor and the gas cooler exhibit the largest non-idealities within the system, and hence, efforts should be focused on improving these components. (C) 2003 Elsevier Ltd. All rights reserved.