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The agriculture sector can contribute to climate change mitigation by reducing its own greenhouse gas (GHG) emissions, sequestering carbon in vegetation and soils, and providing biomass to substitute for fossil fuels and other GHG‐intensive products. The sector also needs to address water, soil, and biodiversity impacts caused by historic and current practices. Emerging EU policies create incentives for cultivation of perennial plants that provide biomass along with environmental benefits. One such option, common in northern Europe, is to include grass in rotations with annual crops to provide biomass while remediating soil organic carbon (SOC) losses and other environmental impacts. Here, we apply a spatially explicit model on >81,000 sub‐watersheds in EU27 + UK (Europe) to explore the effects of widespread deployment of such systems. Based on current accumulated SOC losses in individual sub‐watersheds, the model identifies and quantifies suitable areas for increased grass cultivation and corresponding biomass‐ and protein supply, SOC sequestration, and reductions in nitrogen emissions to water as well as wind and water erosion. The model also provides information about possible flood mitigation. The results indicate a substantial climate mitigation potential, with combined annual GHG savings from soil‐carbon sequestration and displacement of natural gas with biogas from grass‐based biorefineries, equivalent to 13%–48% of current GHG emissions from agriculture in Europe. The environmental co‐benefits are also notable, in some cases exceeding the estimated mitigation needs. Yield increases for annual crops in modified rotations mitigate the displacement effect of increasing grass cultivation. If the grass is used as feedstock in lieu of annual crops, the displacement effect can even be negative, that is, a reduced need for annual crop production elsewhere. Incentivizing widespread deployment will require supportive policy measures as well as new uses of grass biomass, for example, as feedstock for green biorefineries producing protein concentrate, biofuels, and other bio‐based products. [ABSTRACT FROM AUTHOR]