Background insect herbivory, in addition to insect outbreaks, can have an important long term influence on the performance of tree species. Since a projected warmer climate may favour insect herbivores, we use a dynamic ecosystem model to investigate the impacts of background herbivory on vegetation growth and productivity, as well as distribution and associated changes in terrestrial ecosystems of northern Europe. We used the GUESS ecosystem modelling framework and a simple linear model for including the leaf area loss of Betula pubescens in relation to mean July temperature. We tested the sensitivity of the responses of the simulated ecosystems to different, but realistic, degrees of insect damage. Predicted temperature increases are likely to enhance the potential insect impacts on vegetation. The impacts are strongest in the eastern areas, where potential insect damage to B. pubescens can increase by 4–5%. The increase in insect damage to B. pubescens results in a reduction of total birch leaf area (LAI), total birch biomass and birch productivity (Net Primary Production). This effect is stronger than the insect damage to leaf area alone would suggest, due to its second order effect on the competition between tree species. The model's demonstration that background herbivory may cause changes in vegetation structure suggests that insect damage, generally neglected by vegetation models, can change predictions of future forest composition. Carbon fluxes and albedo are only slightly influenced by background insect herbivory, indicating that background insect damage is of minor importance for estimating the feedback of terrestrial ecosystems to climate change.