<p>Peat moss (<i>Sphagnum</i>) plays a crucial role in extenuating the environmental toxicity by swaying the microbial activity and acting as a natural filter for removing pollutants. The peatlands help in the purification of water by filtering out the contaminants and decomposing organic matter by creating anaerobic conditions that create impacts on microbial communities. Additionally, <i>Sphagnum</i> pays for carbon sequestration that makes a positive impact in the carbon sinks process for peatlands. However, decomposition rates of peat vary based on various factors such as humidity, microbial population, and climate changes. It makes renewable sources of biofuel as it converts biofuels through the process of pyrolysis that make an alternative to fossil fuels. The parameters of pyrolysis, such as rate of nitrogen flow, reaction time, and temperature, enhance biofuel productivity. Moreover, the peatland ecosystem controls carbon cycles that help in reducing greenhouse gases like methane and carbon dioxide. Peat is mainly composed of humic substances that improve the nutrient retention and soil quality, creating importance for agriculture. The interconnection between microbes and <i>Sphagnum</i> aids in the absorption of heavy metals and environmental detoxification. However, degradation of peatlands because of overharvesting and climate changes threatens these benefits. Hence, sustainable management methods are required to maintain the integrity of peatlands while using their ecological importance. This study highlights the importance of <i>Sphagnum</i> and its microbial connection in removing pollutants, biofuel production, and carbon sequestration.</p>