The European Union (EU) has experienced a large increase in the use of biomass for energy in the last decades. In 2015, biomass used to generate electricity, heat, and to a limited extent, liquid fuels accounted for 51% of the EU’s renewable energy production. Bioenergy use is expected to grow substantially to meet energy and climate targets for 2020 and beyond. This development has resulted in analyses suggesting the increased use of biomass for energy might initially lead to increased greenhouse gas (GHG) emissions to the atmosphere, a so-called carbon debt. Here, we analyze carbon debt and payback time of substituting coal with forest residues for combined heat and power generation (CHP). The analysis is, in contrast to most other studies, based on empirical data from a retrofit of a CHP plant in northern Europe. The results corroborate findings of a carbon debt, here 4.4 kg CO2eq GJ−1. The carbon debt has a payback time of one year after conversion, and furthermore, the results show that GHG emissions are reduced to 50% relative to continued coal combustion after about 12 years. The findings support the use of residue biomass for energy as an effective means for climate change mitigation.