The increasing concentration of greenhouse gases in the atmosphere and the consequent warming of the Earth's surface presents a threat to the environment and economic development. This paper discusses how regional level impacts of transient climate change on forest growth are assessed with process-based models and how these responses are then scaled up to country and European level using national forest inventory data in combination with the European forest information scenario (EFISCEN) model. Stem wood volume and increment in the EFISCEN model is converted to whole tree biomass based on information from process-based models. Calculation of carbon in soil and in wood products is included in this approach. A preliminary carbon budget under current and changing climatic conditions, with current management regime for Germany, is presented and discussed. Although carbon stocks in trees, soil and products are increasing, we found that the German forest sector can sustain a carbon sink until 2050, but the sink gradually becomes smaller, declining from 1.7 Mg C/ha per year in 1995 to 0.7 Mg C/ha per year in 2050. This is due to ageing of forests, as sink activity in older forests is smaller than in younger forests. The sink activity in the soil increased slightly, but rate of storage in trees decreased more. Under changing climatic conditions, both carbon stock and sink activity in trees and soil were larger than under current climatic conditions. International processes, such as the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol require integrated assessments of the role of forests and forestry on mitigation of climate change, but there is also a need for assessments of the impacts of climate change on forests. Research can provide information for decision-makers regarding the functioning of the system, potential risks and uncertainties. The upscaling approach described in this paper will be used later to investigate the impacts of selected forest management scenarios, under current and changing climatic conditions, on the forestry carbon budgets of 27 European countries.