Hydrothermal carbonization (HTC) technology transforms organic biomass components, such as cellulose and lignin, into valuable carbon materials, gases and inorganic salts through hydrolysis, degradation and polymerization, with significant advantages over traditional methods by reducing energy consumption, lowering pollutant emissions and enhancing carbonization efficiency. In the context of global climate change, HTC plays a critical role in water environment management by addressing industrial, agricultural, and domestic wastewater challenges. The application of HTC extends to wastewater treatment, where hydrochar effectively adsorbs heavy metals, organic compounds, and anions, thereby improving water quality. However, challenges remain, such as optimizing the process for diverse raw materials, managing economic costs, and addressing environmental and social impacts. Future research and policy support are essential for advancing HTC technology. By enhancing reaction mechanisms, developing catalysts, and promoting international cooperation, HTC can significantly contribute towards achieving carbon neutrality goals and fostering sustainable development.