Biomass fuels currently (1994) supply around 14% of the world's energy, but most of this is in the form of traditional fuelwood, residues and dung, which is often inefficient and can be environmentally detrimental. Biomass can supply heat and electricity, liquid and gaseous fuels. A number of developed countries derive a significant amount of their primary energy from biomass: USA 4%, Finland 18%, Sweden 16% and Austria 13%. Presently biomass energy supplies at least 2 EJ year −1 in Western Europe which is about 4% of primary energy (54 EJ). Estimates show a likely potential in Europe in 2050 of 9.0–13.5 EJ depending on land areas (10% of useable land, 33 Mha), yields (10–15 oven-dry tonnes (ODt) ha −1), and recoverable residues (25% of harvestable). This biomass contribution represents 17–30% of projected total energy requirements up to 2050. The relative contribution of biofuels in the future will depend on markets and incentives, on continuous research and development progress, and on environmental requirements. Land constraints are not considered significant because of the predicted surpluses in land and food, and the near balance in wood and wood products in Europe. There is considerable potential for the modernisation of biomass fuels to produce convenient energy carriers such as electricity, gases and transportation fuels, whilst continuing to provide for traditional uses of biomass; this modernisation of biomass and the industrial investment is already happening in many countries. When produced in an efficient and sustainable manner, biomass energy has numerous environmental and social benefits compared with fossil fuels. These include improved land management, job creation, use of surplus agricultural land in industrialised countries, provision of modern energy carriers to rural communities of developing countries, a reduction of CO 2 levels, waste control, and nutrient recycling. Greater environmental and net energy benefits can be derived from perennial and woody energy cropping than from annual arable crops which are short-term alternative feedstocks for fuels. Agroforestry systems can play an important role in providing multiple benefits to growers and the community, besides energy. In order to ameliorate CO 2 emissions, using biomass as a substitute for fossil fuels (complete replacement, co-firing, etc.) is more beneficial from social and economic perspectives than sequestering the carbon in forests. Case studies are presented for several developed countries and the constraints involved in modernising biomass energy along with the potential for turning them into entrepreneurial opportunities are discussed. It is concluded that the long term impacts of biomass programmes and projects depend mainly on ensuring income generation, environmental sustainability, flexibility and replicability, while taking account of local conditions and providing multiple benefits, which is an important attribute of agroforestry-type systems. Biomass for energy must be environmentally acceptable in order to ensure its widespread adoptions as a modern energy source. Implementation of biomass projects requires governmental policy initiatives that will internalise the external economic, social and environmental costs of conventional fuel sources so that biomass fuels can become competitive on a ‘level playing field’.