The increasing production of modern bioenergy carriers and biomaterials intensifies the competition for different applications of biomass. To be able to optimize and develop biomass utilization in a sustainable way, this paper first reviews the status and prospects of biomass value chains for heat, power, fuels and materials, next assesses their current and long-term levelized production costs and avoided emissions, and then compares their greenhouse gas abatement costs. At present, the economically and environmentally preferred options are wood chip and pellet combustion in district heating systems and large-scale cofiring power plants (75–81 US$2005/tCO2-eqavoided), and large-scale fermentation of low-cost Brazilian sugarcane to ethanol (−65 to −53 $/tCO2-eqavoided) or biomaterials (−60 to −50 $/tCO2-eqavoided for ethylene and −320 to −228 $/tCO2-eqavoided for PLA; negative costs represent cost-effective options). In the longer term, the cultivation and use of lignocellulosic energy crops can play an important role in reducing the costs and improving the emission balance of biomass value chains. Key conversion technologies for lignocellulosic biomass are large-scale gasification (bioenergy and biomaterials) and fermentation (biofuels and biomaterials). However, both routes require improvement of their technological and economic performance. Further improvements can be attained by biorefineries that integrate different conversion technologies to maximize the use of all biomass components.