Historically, the function of Arctic ecosystems in terms of cycles of nutrients and carbon has led to low levels of primary production and exchanges of energy, water and greenhouse gases have led to low local and regional cooling. Sequestration of carbon from atmospheric CO2, in extensive, cold organic soils and the high albedo from low, snow-covered vegetation have had impacts on regional climate. However, many aspects of the functioning of Arctic ecosystems are sensitive to changes in climate and its impacts on biodiversity. The current Arctic climate results in slow rates of organic matter decomposition. Arctic ecosystems therefore tend to accumulate organic matter and elements despite low inputs. As a result, soil-available elements like nitrogen and phosphorus are key limitations to increases in carbon fixation and further biomass and organic matter accumulation. Climate warming is expected to increase carbon and element turnover, particularly in soils, which may lead to initial losses of elements but eventual, slow recovery. Individual species and species diversity have clear impacts on element inputs and retention in Arctic ecosystems. Effects of increased CO2 and UV-B on whole ecosystems, on the other hand, are likely to be small although effects on plant tissue chemisty, decomposition and nitrogen fixation may become important in the long-term. Cycling of carbon in trace gas form is mainly as CO2 and CH4. Most carbon loss is in the form of CO2, produced by both plants and soil biota. Carbon emissions as methane from wet and moist tundra ecosystems are about 5% of emissions as CO2 and are responsive to warming in the absence of any other changes. Winter processes and vegetation type also affect CH4 emissions as well as exchanges of energy between biosphere and atmosphere. Arctic ecosystems exhibit the largest seasonal changes in energy exchange of any terrestrial ecosystem because of the large changes in albedo from late winter, when snow reflects most incoming radiation, to summer when the ecosystem absorbs most incoming radiation. Vegetation profoundly influences the water and energy exchange of Arctic ecosystems. Albedo during the period of snow cover declines from tundra to forest tundra to deciduous forest to evergreen forest. Shrubs and trees increase snow depth which in turn increases winter soil temperatures. Future changes in vegetation driven by climate change are therefore, very likely to profoundly alter regional climate.