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As Demand for U.S. Wood Pellet Production Grows

European utilities are using trees grown in the United States to make electricity. Well, not the whole tree. But lots of the tree is used to make the little wood pellets that are then shipped across the ocean, mostly to the Netherlands, United Kingdom, Denmark, and Belgium. It is these wood pellets that are burned with coal or in stand alone biomass boilers to produce energy.

Why is Europe able to make electricity from U.S. trees when domestic utilities are cancelling wood biomass projects? Answer: Europe has a strong renewable energy policy.

The EU Renewable Energy Directive passed in 2009 sets a target for EU member countries to collectively achieve 20% of energy from renewable sources by 2020. Many utilities are increasing the use of biomass as a low-cost means of producing renewable energy. But Europe doesn’t have enough forest or agricultural land to meet the increasing demand. To fill that gap, European utilities are importing wood pellets (a form of chipped and compressed wood) from North America and increasingly from the Southern United States -- European imports are projected to increase to as much as 60 million tonnes annually by 2020. The growing demand for U.S. wood biomass is raising questions about the sustainability of the country’s forest resources.

Two reports from Environmental Defense Fund, in conjunction with colleagues at the Pinchot Institute for Conservation and the University of Toronto, examine economic, environmental, and public health impacts from the expanding wood pellet market. European Power from U.S. Forests (download report PDF) documents how the EU policy is shaping the transatlantic trade in wood biomass. For the U.S. export market to benefit from the large potential capacity for pellet production, producers in the U.S. will need to meet or exceed sustainability standards of the EU and individual European countries. Some type of forest management or pellet supply chain management system (e.g. forest management certification and/or chain-of-custody certification) is likely to be required.

Pathways to Sustainability (download report PDF) evaluates the programs and practices available to U.S. pellet producers to meet European buyers’ sustainability expectations and policy requirements, concluding that few of the pathways completely meet the standards.

Specifically Pathways to Sustainability: (1) explains the uncertainties of existing import requirements and the options that can help this sector avoid controversial sourcing; and (2), presents the ways companies can reduce actual or perceived risks that sourcing may have on biodiversity, water resources, and other natural resource values.

Sustainability will remain a pivotal issue as EU member countries, the European Commission and various stakeholders seek to harmonize sustainability requirements. European bioenergy companies often view biomass sustainability as the largest unquantified risk in their supply chains. The supply chains for wood pellets are being formed now. Developing Pathways to Sustainability for biomass supply chains now will reduce economic risk and encourage market development both here in the U.S. and for use of wood pellets abroad.

The U.S. Endowment for Forestry and Communities released two followup reports to help build understanding of the wood energy pellet sector. Those reports can be found here.