Abstract: There is provided a method of hydrothermal carbonization of a sludge, comprising the steps of: preheating the sludge to obtain a preheated sludge; mixing the preheated sludge with a wet-oxidized fraction to obtain a reaction mixture; subjecting the reaction mixture to hydrothermal carbonization (HTC) in a reactor to obtain a HTC-treated sludge; separating a fraction from the HTC-treated sludge; and mixing the fraction with an oxidizing agent, such as oxygen gas, to obtain the wet-oxidized fraction, wherein the temperature of the fraction before the wet oxidation is at least 15° C. higher than the temperature of the preheated sludge. A corresponding system is also provided.