On combustion the carbon from biomass power plant is released into the atmosphere as carbon dioxide (CO2). The amount of carbon stored in dry wood is approximately 50% by weight. When from agricultural sources, plant matter used as a fuel can be replaced by planting for new growth. When the biomass is from forests, the time to recapture the carbon stored is generally longer, and the carbon storage capacity of the forest may be reduced overall if destructive forestry techniques are employed.

The existing biomass power generating industry in the United States, which consists of approximately 11,000 MW of summer operating capacity actively supplying power to the grid, produces about 1.4 percent of the U.S. electricity supply.

Currently, the New Hope Power Partnership is the largest biomass power plant in North America. The 140 MW facility uses sugar cane fiber (bagasse) and recycled urban wood as fuel to generate enough power for its large milling and refining operations as well as to supply renewable electricity for nearly 60,000 homes. The facility reduces dependence on oil by more than one million barrels per year, and by recycling sugar cane and wood waste, preserves landfill space in urban communities in Florida.

Biomass power plant size is often driven by biomass availability in close proximity as transport costs of the (bulky) fuel play a key factor in the plant's economics. It has to be noted, however, that rail and especially shipping on waterways can reduce transport costs significantly, which has led to a global biomass market. To make small plants of 1 MWel economically profitable those power plants have need to be equipped with technology that is able to convert biomass to useful electricity with high efficiency such as ORC technology, a cycle similar to the water steam power process just with an organic working medium. Such small power plants can be found in Europe.

Despite harvesting, biomass crops may sequester carbon. So for example soil organic carbon has been observed to be greater in switchgrass stands than in cultivated cropland soil, especially at depths below 12 inches. The grass sequesters the carbon in its increased root biomass. Typically, perennial crops sequester much more carbon than annual crops due to much greater non-harvested living biomass, both living and dead, built up over years, and much less soil disruption in cultivation.

The biomass-is-carbon-neutral proposal put forward in the early 1990s has been superseded by more recent science that recognizes that mature, intact forests sequester carbon more effectively than cut-over areas. When a tree’s carbon is released into the atmosphere in a single pulse, it contributes to climate change much more than woodland timber rotting slowly over decades. Current studies indicate that recapturing carbon released by burning will take minimally hundreds of years.

Using biomass as a fuel produces the same air-pollution challenges as other fuels. Black carbon - a pollutant created by incomplete combustion of fossil fuels, biofuels, and biomass - is possibly the second largest contributor to global warming. In 2009 a Swedish study of the giant brown haze that periodically covers large areas in South Asia determined that it had been principally produced by biomass burning, and to a lesser extent by fossil-fuel burning. Researchers measured a significant concentration of 14C, which is associated with recent plant life rather than with fossil fuels.