The European Union (EU) aims at reaching carbon neutrality by 2050. Within the land use, land-use change, and forestry (LULUCF) sector, forestry will contribute to this target with CO2 sink, harvested wood products (HWP), and use of wood for material or energy substitution. Despite the fact that the forest sink currently offsets about 9% of the total EU GHG emissions, evaluating its future mitigation potential is challenging because of the complex interactions between human and natural impacts on forest growth and carbon accumulation. The Regulation (EU) 2018/841 has improved robustness, accuracy, and credibility of the accounting of GHG emissions and removals in the LULUCF sector. For the forest sector, the accounting is based on the Forest Reference Level (FRL), i.e., a projected country-specific value of GHG emissions and removals against which the actual GHG emissions and removals will be compared. The resulting difference will count toward the EU GHG target for the period 2021–2030. Here, we provide an overview of the contribution of forests and HWP to the EU carbon sink for the period 2021–2025 (proposed FRLs) and focus on the contribution of mountain forests to the EU carbon sink, through exploring co-benefits and adverse side effects between climate regulation and other ecosystem services.