This paper evaluates the environmental impacts of different alternatives for handling of sludge from paper and pulp mills in Sweden, using Life Cycle Assessment (LCA). The common practice of incineration of biosludge with energy recovery followed by landfilling of ash (System A) was compared with the alternative of digesting sludge anaerobically to produce biogas using different digestate residue management options. The digestate produced from anaerobic digestion (AD) was assumed to be incinerated for heat energy recovery in System B or pyrolyzed for biochar production in System C to be mixed with forest soils. The impact categories considered in this work are climate change, non-renewable energy use, mineral extraction, aquatic ecotoxicity, carcinogens and non-carcinogens. The LCA results demonstrate that the two proposed systems significantly reduce the environmental impacts of biosludge management relative to incineration. An 85% reduction in the aquatic ecotoxicity impact is achieved in System C, due to the reduced mobility of heavy metals in biochar relative to ash. System C, on the whole, outperformed the other two, leading the authors to the recommendation that the use of pulp and paper mill biosludge in biogas-biochar production systems is preferable to merely recovering energy from it.