Australia is highly dependent on cheap fossil fuels for energy generation and under the Kyoto Protocol was one of only three industrialised nations to be granted an increased greenhouse gas (GHG) emissions target. To help meet an effective GHG reduction of at least 20% below expected growth rates for GHG so that there is an increase of only 8% above 1990 levels by 2010, Australia has implemented a mandatory target for electricity retailers to obtain an additional 9.5 TWh yr of electricity from renewable sources by 2010. Forest biomass could be a significant and effective renewable energy source. There is a potentially large supply of low-cost residual woody biomass from sawlog-driven harvesting, thinnings, and wood processing. There are also abundant land clearing residues available, but these sources are not sustainable. Various technologies for the conversion of woody biomass to fuels for heat and power generation are outlined: combustion, gasification, carbonisation, densified fuels manufacture, and biochemical conversion. Examples are given of current development and implementation of these technologies in Australia. The establishment of new plantation forests can create carbon sinks that are potentially tradeable. Electricity utilities and large power consumers are being encouraged to invest in reforestation and afforestation to offset their carbon emissions. A plan to treble the commercial plantation forest estate by 2020 that is currently being implemented, would offset up to 6% of Australia's GHG emissions during the first Kyoto commitment period (2008-12).