Anaerobic digestion constitutes a sustainable method for waste management and renewable energy generation, addressing significant environmental and societal challenges. The growing global waste crisis and the increasing momentum toward sustainable energy solutions emphasize the critical need to enhance anaerobic digestion technology for improved efficiency and environmental advantages. This process mitigates waste accumulation, enhances energy security, and reduces greenhouse gas emissions, providing a feasible solution within the framework of a circular bioeconomy. Here, we review the principles of anaerobic digestion and biogas production, focusing on agricultural waste and the utilization of biogas for energy within a sustainable framework. We specifically explore biogas applications in rural and industrial settings, assess the environmental impacts, and discuss the regulatory landscape with insights from China and Europe. This study reveals that the strategic implementation of anaerobic digestion can markedly improve energy yield and sustainability, demonstrating how focused policies and advanced technological practices can optimize biogas utilization. The review enhances comprehension of environmental impacts, emphasizing insights from China and Europe as key examples.