Forest biomass is used in many countries as an abundant and easily accessible source of renewable energy. While forest biomass has certain advantages in terms of carbon sink capability, it cannot be considered an emission-free energy source, and the environmental differences among various forest biomass sources have been unclear. This study uses life cycle assessment for two purposes. The first is to quantify the environmental impacts of the energy production of a small-scale, combined heat and power production plant utilizing different forest biomasses. The second aim is to estimate the change in environmental impacts on district heat production from natural gas when partially replacing it by heat from the combined heat and power plant. The environmental impacts include global warming potential, acidification potential, and eutrophication potential. The calculated environmental impacts of utilizing different forest biofuels in the CHP plant in relation to produced energy are 2.2-5.1 gCO2,eq./MJenergy excluding biogenic carbon emission, 59-66 gCO2,eq./MJenergy with biogenic carbon emission, and 133-175 mgSO2,eq./MJenergy and 18-22 mgPO34-,eq./MJenergy with pellets, showing the highest values. The results indicate that by using forest biomass instead of natural gas in energy production, the global climate impacts are reduced when biogenic carbon is excluded, while the local effects are higher (acidification potential and eutrophication potential). Including biogenic carbon reduces the calculated climate benefit since the total emissions end up being 4-7 % over those of natural gas use. The potential benefits need to be weighed against the possible drawbacks.