Climate warming affects plant physiology through genetic adaptation and phenotypic plasticity, but little is known about how these mechanisms influence ecosystem processes. We used three elevation gradients and a reciprocal transplant experiment to show that temperature causes genetic change in the sedge Eriophorum vaginatum. We demonstrate that plants originating from warmer climate produce fewer secondary compounds, grow faster and accelerate carbon dioxide (CO2) release to the atmosphere. However, warmer climate also caused plasticity in E. vaginatum, inhibiting nitrogen metabolism, photosynthesis and growth and slowing CO2 release into the atmosphere. Genetic differentiation and plasticity in E. vaginatum thus had opposing effects on CO2 fluxes, suggesting that warming over many generations may buffer, or reverse, the short-term influence of this species over carbon cycle processes. Our findings demonstrate the capacity for plant evolution to impact ecosystem processes, and reveal a further mechanism through which plants will shape ecosystem responses to climate change.