Contributed by: C. Bryant Dudley, CFIRE project assistant
In 2009 the European Union (EU) ratified the Renewable Energy Directive, which outlined three objectives for member states to meet by 2020:

1. Increase renewable energy consumption to 20 percent of total energy consumption;
2. Reduce total energy consumption by 20 percent;
3. Reduce greenhouse gas (GHG) emissions by 20 percent.

These initiatives, especially those that focus on renewable energy consumption and emissions, provide an opportunity for expansion of the renewable energy market. The EU is scheduled to release details about required certifications for importers of renewable energy products by the end of 2012.
According to the Environmental Defense Fund, the EU is the world’s largest consumer of wood pellets at 10.4 million tons per year. Projections suggest that the EU will require between 16 million and 60 million tons of imported wood pellets to carry out the goals of the Renewable Energy Directive (Joudrey, 2012).
Wood pellets are scraps of wood that are transformed to a high density and low moisture content (usually under 10 percent). Pellets burn hotter (reducing their harmful emissions) and are more economical to transport. The demand for wood pellets is driven by 1) a nation’s reliance on fossil fuels, 2) the need to address the effects of climate change, 3) the need to improve energy security and independence.
The United States currently produces only 1.8 million tons per year. Eighty percent of domestic wood pellets are consumed in the United States, mostly in residential heating applications in the Northeast. In addition, the United States only uses 66 percent of its capacity for producing wood pellets. In comparison, Canada exports 90 percent of their domestic supply, primarily to the EU.
Although the annual production of wood pellets in the United States is small in comparison to the needs of the EU, this market is growing steadily, doubling in capacity every 2-3 years since 2001 (Spelter, 2009). In 2009, nearly 800,000 tons of wood pellets were produced in Midwestern states.
The EU Renewable Energy Directive could create an opportunity for economic growth for the states of the Mid-America Freight Coalition, many of which have wood pellet production facilities.

This export market, which includes three distinct end-user segments—industrial power plans, smaller scale district heating or CHP plants, and residential heating—is only likely to grow as the shift to more renewable forms of energy continues. Producers, exporters and shippers in the MAFC region could benefit from this trend.

References

• Joudrey, J., McDow, W., Smith, T., and Larson, B.  (2012). European Power from U.S. Forests : How Evolving EU Policy Is Shaping the Transatlantic Trade in Wood Biomass. Retrieved November 1st, 2012.
• Spelter, H. and Toth, D. (2009). North America’s Wood Pellet Sector. United States Department of Agriculture, Forest Service, Forest Products Laboratory. Research Paper FPL–RP–656. Retrieved November 1st, 2012.