Arctic coastal permafrost erosion is projected to increase by a factor of 2–3 by 2100. However, organic matter fluxes from the coastal permafrost into the ocean have not been considered in Earth system models so far. Here we represent coastal permafrost erosion in an Earth system model and perform simulations with varying permafrost organic matter properties, such as sinking fraction and nutrient content. We find that coastal erosion reduces the Arctic Ocean CO2 uptake from the atmosphere in all simulations: by 4.6–13.2 TgC yr−1 by 2100, which is ~7–14% of the Inner Arctic Ocean uptake. We show that coastal permafrost erosion exerts a positive biogeochemical feedback on climate, increasing atmospheric CO2 by 1–2 TgC yr−1 per °C of increase in global surface air temperature. Our work will allow coastal permafrost erosion to be considered in future climate change assessments.