A new study by the European Cyclists Federation (ECF) looked at the CO2 impact of biking, driving cars, taking the bus, and found - not too surprisingly, but it's good to have the hard data to back up any claims - that if the countries of the EU-27 reached a level of biking similar to Denmark's, that reductions of CO2 emissions of between 63 and 142 million tons per year could be possible by 2050. This would be 12 to 26% of the target reduction set for the transport sector by the European 2050 targets.
This isn't some pipe dream. 2050 is far enough in the future that there's time to make infrastructure investments to bring up the level of "bike-friendliness" in cities where it is lagging, and it's long enough for smart incentives to work their magic and discourage car usage (especially in cities and for commuting).
As you can see in the picture above, bike LCA came to 21g of CO2 per kilometer, electric-assist bikes were 22g, buses scored 101g of CO2/km, and passenger cars got an average of 271g CO2/km (and that's just for short trips that could be replaced by bikes, which is what the study focused on).
Another thing to keep in mind when looking at the pictures in this post and in reading the numbers in the study (PDF) is that the ECF has been extremely conservative in its estimates, trying to avoid any accusations of being biased in favor of bikes. They went as far as not including infrastructure for cars, or things like parking and maintenance, in their calculations. This means that with a more realistic set of assumptions, bikes would come even more ahead.
Another thing of note in the study is the part where they discuss the life-cycle impact of cars (page 12 of the study). They found that 77% of the impact came from what they call 'tank to wheels', or the burning of the fuel. This means that fuel efficiency makes a big difference; while it isn't nearly as green as biking, if you have to drive a car, make sure it is the most fuel-efficient model that fits your needs and drive it sanely to keep MPG as high as possible.
Via ECF (pdf), BikePortland