Due to scarcity of firewood, farmers in rural Ethiopia are forced to use cattle dung as a complementary energy source. By looking at patterns of firewood and cattle dung use for energy generation and their implications for food crop production, forest regeneration and community level emission reduction potentials, this study explores system interactions using a community living next to the Menagesha Suba state forest in Ethiopia as a case study. Mixed methods were used including household surveys, nutrient content analyses of firewood and cattle dung, and calculations of fuel and emission reductions for four cooking energy efficiency scenarios. It was found that the community and surrounding environment is stuck in a negative feedback cycle. Therefore shifts in current practices and systems are needed to break this cycle, for example by enhancing firewood supply, improving soil fertility, improving energy efficiency and enabling access to carbon financing for emissions reduced.