Carbon (C) sequestration and soil emissions of nitrous oxide (N₂O) affect the carbon dioxide (CO₂) advantage of energy crops. A long-term study has been performed to evaluate the environmental effects of energy crop cultivation on the loamy sand soil of the drier northeast region of Germany. The experimental field, established in 1994, consisted of columns (0.25 ha each) cultivated with short rotation coppice (SRC: Salix and Populus) and columns cultivated with annual crops. The columns were subdivided into four blocks, with each receiving different fertilization treatments. The soil C content was measured annually from 1994 until 1997, and then in 2006. Soil N₂O levels were measured several times per week from 1999 to 2007. Water-filled pore space (WFPS) and soil nitrate measurements have been performed weekly since 2003. Increased C stocks were found in SRC columns, and C loss was observed in blocks with annual crops. The soil from fertilized blocks had higher levels of C than the soil from non-fertilized blocks. SRC cropping systems on dry, loamy sand soils are advantageous relative to annual cropping systems because of higher C sequestration, lower fertilized-induced N₂O emissions, and reduced background N₂O emissions in these soils. SRC cropping systems on dry, loamy sand soils have a CO₂ advantage (approximately 4 Mg CO₂ ha⁻¹ year⁻¹) relative to annual cropping systems.