You may have heard that natural gas has been replacing coal in many power plants, a shift which lowers carbon emissions from electricity generation. But there’s another form of energy that’s increasingly being used to replace coal: wood.

Wood pellets are a renewable energy source and there are circumstances where wood energy can reduce net CO2 emissions. Yet turning to biomass to generate electricity alters the economics of forestry and raises a number of sometimes-complex environmental questions.

Europe has created a market for large-scale pellet production by requiring every member country to increase their use of renewable energy and reduce their greenhouse gas emissions. Wood pellets are being used to replace coal by co-firing with coal in some older plants. In addition, new pellet-only capacity has been added to the European grid. Forests in the southeast US supplied nearly four million tons of wood pellets to European power generators in 2014.

But can forests provide a fuel source for power generation, while also supplying existing paper industries? Is burning biomass better than burning coal? Are current US and EU policies adequately addressing forest sustainability? To answer these questions, we have been researching how forests work, both ecologically and economically.

Is wood better than coal for carbon emissions?

On the one hand, burning wood for electricity generation produces between 10% and 35% more carbon emissions per unit of power than coal. That is, to generate one kilowatt of electricity, you would produce more carbon emissions from wood than coal. On the other hand, when trees are harvested from land that is kept as a forest, the new trees sequester carbon as they grow (trees are roughly half water and half carbon), reducing net carbon emissions from the earlier harvest.

But calculating how much forests reduce emissions is complicated. There is a large and growing literature on the potential carbon consequences of growing and harvesting trees for various uses. The comparative advantage of one potential use over another comes from analyzing the net impact over the life cycle of the product. Tracking the carbon consequences of these different paths has become a branch of science called life cycle analysis (LCA).

Carbon payback

When trees are harvested and then burned for energy, this creates what is sometimes called a carbon debt – carbon is removed from a sequestered state (trees) and emitted to the atmosphere. The regrowth of the forest determines the carbon payback period, or the amount of time until the forest has resequestered the same amount of carbon as what was emitted through burning for energy.

Carbon payback periods are sensitive to alternative wood uses, forest growth rates, what fuel types are being replaced, and the efficiency of the supply chain, manufacturing, shipping and power generation activities. And it matters whether you evaluate the carbon debt for each acre that is harvested, or if you consider the forest landscape as a whole. That’s because responses to price increases could add timberland or change management of timberland that is not part of the acre harvested.

So if we harvest trees to make pellets for electricity and consider all the carbon emissions in the production and use of these trees (including competing uses), then under certain conditions wood could have lower emissions than coal. The challenge is to develop scientifically based, equitable and reasonable methods to measure whether wood use is actually reducing net carbon emissions in practice.

The economics of forestry

From a technical perspective, there is certainly adequate timber area and timber growth to provide the raw material for both the existing paper industry and the emerging demand for power generators.

However, there is a price for adding a new use. Notably, the price of small timber, which is cut for paper and pellet production, will likely increase from the additional demand. This will be a good thing if you are a landowner. This will not be a good thing if you are a paper mill.

But regardless of how much increase there is in small timber prices, the revenues companies can get from sawtimber, or the timber cut for turning into lumber, will continue to be the main driver of how much forest is harvested.

When the price of timber increases, both buyers and sellers could change their actions depending on whether they see the increase as temporary or long-lasting. If it’s a temporary change, especially during a time when both sawtimber and biomass-for-energy prices are low, as they are now, timber buyers might cut more intermediate sized trees, or they might buy wood further from their mill.

If buyers and sellers believe there will be a long-term increase in prices, then forest owners might manage their forests to favor small trees or they might plant trees on marginal agricultural land. Increased prices could also lead to shorter harvest cycles, especially if sawtimber, which comes from larger trees, prices stay low. And, higher small timber prices might make the southern paper industry less competitive with other regions and countries, which could lead wood industries to change the scale or location of their capital investments, develop more efficient technologies, or invest in reducing supply risk.

Southern forests have a history of utilization. Over the last 50 years both timber harvest and timber inventories have increased by over 50 percent. And while area of timberland in this period has remained fairly constant, urbanization in the south is threatening that stability.

Increasing harvest for pellets could lead to relatively more land in forests, rather than agriculture, because when prices rise, landowners get more for their timber, and then they are more likely to keep their land in forest after a harvest. Even as an increase in harvest for energy could lead to more timberland, however, it could also lead to younger forests and possibly different forest types as higher prices lead landowners to convert natural forests to plantations.

It’s worth noting that if wood is not used for biomass, there will still be land competition with agriculture and urban development, which would continue to reduce the amount of forested land in the US south.

Policy questions

Do we have the policies in place, either here or in the EU, to ensure that any use of wood for energy leaves us with healthy, sustainable forests?

This depends on who you ask, and mostly, it depends on how you define a healthy, sustainable forest. If the objective is to keep older but less timber-productive naturally regenerated forests, then the current market-based policies raise concerns.

If the objective is to keep, or even increase, the amount of land in productive and profitable forest management, then current market-based policies should provide the correct incentives.

New sustainability policies enacted by member EU countries are as yet untested for their impact on southeast US forests. And the tradition and law of the US that holds private control over private landholdings as sacred would make any new US policies unlikely.

That means that for now as in the past, it is the economic demand for more forest products, including biomass, – rather than land use or environmental policies – that is dictating how our forests will change.