Europe's Wood Loophole

Minna Xiao
December 11, 2015

Submitted as coursework for PH240, Stanford University, Fall 2015


In its 2009 Renewable Energy Directive, the European Union set the energy target that by 2020, a mandatory 20 percent of the E.U.'s final energy mix must come from renewable energy sources. [1] While much attention has focused on the expansion of solar and wind power throughout Europe, by far the largest renewable fuel used on the continent is wood. Wood is categorized under the umbrella term "biomass," which describes biological material derived from living organisms. Last year, wood burning in Europe accounted for nearly half of all Europe's renewable energy. [1] Countries like Finland, which boasts large forest reserves, have even greater dependency on wood for energy; in Finland, wood meets more than 80 percent of renewable energy demand. [2] This poses the question: why is wood such a prevalent energy source in Europe, especially when it isn't the case in countries like Canada or the United States? The answer can largely be found in an examination of the E.U.'s climate laws.

The Bioenergy Accounting Error

The E.U. climate rules contain an entrenched loophole that has been termed a "bioenergy accounting error." This loophole treats electricity generated by burning wood as a "carbon neutral" or "zero emissions" energy source - the same as solar panels or wind turbines. [1] In the simplest terms, wood is considered a renewable energy in the 27 member states that make up the E.U. In the 1990s, this potential loophole went barely noticed when it was included in the Kyoto Protocol, as the idea of large-scale wood energy was utterly not on the radar at the time. In the Renewable Energy Directive, biomass is exempt from carbon cap-and-trade fees. [3] The argument for carbon neutrality comes from the idea that the carbon released through wood burning will simply be "paid back" through forest regrowth. When trees are cut down, they stop absorbing carbon dioxide, and when they are burned for electricity, the release the sequestered carbon into the atmosphere (carbon debt). When the forest regrows, it will absorb enough carbon dioxide to offset the carbon debt (carbon payback period). [1]

Carbon Neutral?

The problem with this carbon neutrality assumption is its gross oversimplification of the carbon debt-carbon payoff process. First of all, time is an incredibly important yet overlooked factor to the carbon payoff period. It takes decades or even centuries before burning trees for electricity can be considered carbon neutral. While biomass such as waste or residues has a shorter estimated payback period (5-30 years), a significant portion of the European biomass source comes from whole trees, particularly natural hardwood forests, to produce wood pellets. [4] Cutting and burning whole trees for fuel can increase carbon emissions relative to fossil fuels anywhere from 35 too 100 years. [4] The climate crisis is an extremely urgent and time-sensitive one, and carbon neutrality that depends on a decades- to centuries-payback period is an entirely unfeasible solution. Moreover, wood has a carbon content of around 50 percent, and burning wood pellets emits more carbon dioxide per unit of energy generated than fossil fuels because wood is less energy-dense and contains more moisture. [1] Unfortunately, by nature of the E.U. loophole, the true carbon cost of wood is never documented. When power plants burn wood, the only carbon dioxide pollution they are required to report is from the burning of fossil fuels needed to manufacture and transport the wood fuel. The rest is assumed to be carbon neutral. [5] The E.U. does not report any climate pollution when wood is burned nor when trees are cut down to provide the fuel. [5]

Government-Fueled Growth

The categorization of wood as a renewable has led to a steep rise in wood usage in the past decade. But even if wood is considered a renewable, what makes it a more popular energy source than solar or wind? First of all, power companies can burn wood using already existing coal-fired plants. In a process called co- firing, power plants burn a mixture of 90-percent coal and 10-percent wood. [2] Little modification of pre-existing infrastructure is required to switch over to wood burning. Governments see wood as the only way to meet their renewable-energy targets.

Furthermore, because wood is a renewable in the E.U., wood burning for electricity receives generous subsidies in Europe. Wood fuel cannot compete with coal or gas on price, but now power plants are receiving hundreds of millions of dollars in climate subsidies from national governments seeking to meet the continent's climate targets. Moreover, these power companies are avoiding tens of millions more in feeds normally levied on climate polluters. [6] Drax, one of Europe's largest coal-fired power stations located in the UK, is currently in talks to convert the fourth of its six units to run on wood pellets. In 2014, Drax reported nearly 700 million pounds in profits, which was supported by 550 million pounds in UK green energy subsidies. This hefty sum in subsidies is more than Drax's 2012 pretax profit of 190 million pounds. [2]


Meanwhile, the rapid acceleration of wood burning in the past decade has created what Gordon Murray, executive director of the Wood Pellet Association of Canada, calls "an industry invented from nothing." [2] This industry refers to the new global wood-exporting business that is booming in the likes of western Canada and the American south and being built on the back of subsidies in Europe. Yearly wood pellet exports from the U.S. to Europe more than doubled in the past few years, to nearly four million tons in 2014, in order to meet the growing demand. [7] The United States claimed a 60-percent share of the EU wood pellet market in 2014. [7] Not only is this hastening deforestation in these areas, but whole trees are being cut down to make wood pellets, which creates a much higher carbon debt than bio waste or residues. [1] There are other severe risks to consider, too. With China looking to cut down its coal habit, there is a real danger that it will follow Europe's example and convert coal power plants to burn wood pellets. Deforestation would then worsen throughout Asia and Russia, which would be the likely wood suppliers to countries following Europe's lead. [7]


A major concern that needs to be addressed in the midst of this wood fervor is the significant lack of adequate sustainability standards for wood energy in place. Because there are no E.U.-wide binding sustainability criteria in place, most of Europe's power plants do not require their pellet producers to source from forests certified by sustainable forestry programs. This is problematic since American forests, for example, receive few environmental protections under local, state or federal laws. [1] Furthermore, there is thus no guarantee that the carbon debt from using wood energy is repaid, which further undermines the alleged "carbon neutrality" of wood. So far, efforts to propose potential sustainability standards have been stifled for over five years, largely due to Finland and Sweden, which rely primarily on wood for renewables. [3] More importantly, the European Union needs to reconsider the classification of wood as a renewable and close its loophole.

© Minna Xiao. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] D. Bourguignon, "Biomass for Electricity and Heating," European Parliament, September 2015.

[2] "The Fuel of the Future: Environmental Lunacy in Europe," The Economist, 6 Apr 13.

[3] "EU Biofuels Annual 2015," United States Department of Agriculture, GAIN Report No. NL52028, 15 Jul 15.

[4] J. Warrick, "How Europe's Climate Policies Led to More U.S. Trees Being Cut Down," Washington Post, 2 Jun 15.

[5] S. Alberici et al., "Subsidies and Costs of EU Energy," European Commission, 11 Nov 14.

[6] S. Reed, "Wood-Burning British Power Plant Is Emblem of an Industry at a Carbon Crossroads," New York Times, 10 Dec 15.

[7] A. Inouye, "Money Does Grow on Trees as U.S. Forest Product Exports Set Record," U.S. Department of Agriculture, 16 Apr 15.