AbstractBioenergy from crops is expected to make a considerable contribution to climate change mitigation. However, bioenergy is not necessarily carbon neutral because emissions of CO2, N2O and CH4 during crop production may reduce or completely counterbalance CO2 savings of the substituted fossil fuels. These greenhouse gases (GHGs) need to be included into the carbon footprint calculation of different bioenergy crops under a range of soil conditions and management practices. This review compiles existing knowledge on agronomic and environmental constraints and GHG balances of the major European bioenergy crops, although it focuses on dedicated perennial crops such as Miscanthus and short rotation coppice species. Such second‐generation crops account for only 3% of the current European bioenergy production, but field data suggest they emit 40% to >99% less N2O than conventional annual crops. This is a result of lower fertilizer requirements as well as a higher N‐use efficiency, due to effective N‐recycling. Perennial energy crops have the potential to sequester additional carbon in soil biomass if established on former cropland (0.44 Mg soil C ha−1 yr−1 for poplar and willow and 0.66 Mg soil C ha−1 yr−1 for Miscanthus). However, there was no positive or even negative effects on the C balance if energy crops are established on former grassland. Increased bioenergy production may also result in direct and indirect land‐use changes with potential high C losses when native vegetation is converted to annual crops. Although dedicated perennial energy crops have a high potential to improve the GHG balance of bioenergy production, several agronomic and economic constraints still have to be overcome.