In recent years successful attempts have been made to develop and improve spatial modelling of mountain permafrost distribution. Work package 4 of the PACE project (Permafrost and Climate in Europe) sought to provide the essential basis not only of present-day modelling capability, but also of future enhancements in modelling methodology. This paper briefly outlines the currently available typology of models, which involve various levels of sophistication at different spatio-temporal scales. Appropriate models may be applied to a range of environmental issues in cold mountain areas, including engineering applications, climate-change scenarios, large-scale mapping, studies of surface processes or environmental concerns. Special emphasis is given here to aspects of energy exchange at the surface and within the active layer. Such energy fluxes remain poorly understood but play an essential role in process-oriented research and sensitivity studies with respect to complex interactions and feedbacks within the system. In contrast to relatively flat permafrost areas in polar and subpolar lowlands, circulation of water and air can cause important lateral fluxes of matter and energy within coarse blocks on steep slopes and result in highly variable and sometimes extreme thermal offsets between the ground surface and the permafrost table. Measuring and numerically modelling such fluxes together with coupling time-dependent surface and subsurface ground thermal conditions in characteristic materials (bedrock, ice-rich debris, fine-grained deposits) constitute the main challenge for research in the near future.