Anaerobic digestion (AD) can play an important role in achieving the renewable energy goals set within the European Union. Within this article the focus is placed on reaching the Dutch local renewable production goal set for the year 2020 with locally available biomass waste flows, avoiding intensive farming and long transport distances of biomass and energy carriers. The bio-energy yields, efficiency and environmental sustainability are analyzed for five municipalities in the northern part of the Netherlands, using three utilization pathways: green gas production, combined heat and power, and waste management. Literature has indicated that there is sufficient bio-energy potential in local waste streams to reach the aforementioned goal. However, the average useful energy finally produced by the AD production pathway is significantly lower, often due to poor quality biomass and difficult harvesting conditions. Furthermore, of the potential bio-energy input in the three utilization pathways considered in this article, on average: 73% can be extracted as green gas; 57% as heat and power; and 44% as green gas in the waste management pathway. This demonstrates that the Dutch renewable production goal cannot be reached. The green gas utilization pathway is preferable for reaching production goals as it retains the highest amount of energy from the feedstock. However, environmental sustainability favors the waste management pathway as it has a higher overall efficiency, and lower emissions and environmental impacts. The main lessons drawn from the aforementioned are twofold: there is a substantial gap between bio-energy potential and net energy gain; there is also a gap between top–down regulation and actual emission reduction and sustainability. Therefore, a full life cycle-based understanding of the absolute energy and environmental impact of biogas production and utilization pathways is required to help governments to develop optimal policies serving a broad set of sustainable objectives. Well-founded ideas and decisions are needed on how best to utilize the limited biomass availability most effectively and sustainably in the near and far future, as biogas can play a supportive role for integrating other renewable sources into local decentralized energy systems as a flexible and storable energy source.