Abstract In many regions of Europe, grassland is no longer needed for fodder production as it is not economically viable. However, due to the important role it plays in soil carbon storage, it is imperative that grassland should be maintained. The energetic use of its biomass could be an alternative means of generating income from grassland. The aim of this study is to identify the best permanent grasslands management systems for CHP production with regard to maximizing biogas yields, energy use efficiency and greenhouse gas mitigation potential. A long-term field trial was established in 1994 and managed under various nitrogen fertilizer level regimes and cutting frequencies until 2007. Annual dry matter yields ranged between 9.1 t ha−1 and 10.8 t ha−1. Based on these data the methane yields for the different cutting regimes were calculated. The highest methane yield of 288.4 L kg−1 oDM was calculated for a yearly cutting regime of four cuts. Energy and CO2 balances were calculated to assess the energy efficiency and the global-warming potential of power generation in a CHP plant using biogas produced from the different grassland management systems. The highest net energy yield (48.52 GJ per hectare per year) was calculated for a two-cut regime. Furthermore, the highest CO2 equivalent reduction potential was also documented for a cutting frequency of two cuts per year. In this case a CO2eq mass reduction of 5.1 t per hectare per year could be achieved compared to fossil fuel (consisting of a German power mix and natural gas components) reference systems.