Market Overview
Wood fuels such as wood pellets and wood chips are a form of biofuels originating from wood biomass. Wood fuels are used to generate electricity and heat. Wood fuels are readily available, both as a source of firewood or wood waste and at affordable prices.
The global wood fuels market has been analyzed based on various dimensions and segments to help suppliers within the industry have a better understanding of the structure of current demand and the components of demand, which will drive growth in the future. Suppliers in the global wood fuels market outperforming the overall industry are expected to focus on the higher potential segments within the market.
The market outlook has been developed by studying the combined impact of factors that drive growth in conjunction with the challenges faced by the industry to estimate a compounded annual growth rate of 10.27% between 2025 and 2031. The global wood fuels market was valued at $15,519.33 million in 2024 and is estimated to grow to $25,305.73 million in 2031.
Market Dynamics
Drivers
Stringent regulations on carbon dioxide emissions
Emissions from burning coal account for the largest share of CO2 emissions from human activity. Globally, government bodies are focusing on reducing GHG emissions. Amid international agreements such as the Kyoto Protocol, the foothold of coal-powered electricity generation in the global energy mix is uncertain. Agencies such as the Environmental Protection Agency (EPA), the Intergovernmental Panel on Climate Change, and the Climate Change Act of 2008 have targets to reduce GHG emissions. These regulations encourage the use of alternatives such as bioenergy. Biomass is a carbon-neutral energy source, which makes it beneficial to create a low-pollution environment and contributes to the targets set by the governments. Such factors will drive the growth of the global wood fuels market during the forecast period.
Market Segmentation Analysis
The global Wood Fuels Market is segmented based on type, application and region.
The wood pellets segment held the largest market share in the global wood fuels market in 2024. Wood pellets are a form of wood fuel used to generate electricity and heat. They are made from sawdust or other woody biomass with/without additives. They are generally available in a cylindrical form and of various lengths. Wood pellets are extensively used for industrial boilers as a substitute for natural gas and coal, making them eco-friendly and for generating thermal and gasification power. Wood pellets are also used as fuel in thermal and gasification power production. The wood pellets segment is expected to grow significantly during the forecast period, driven by government ventures to promote renewable energy and the increasing adoption of wood pellets as a fuel source in various industries such as power. They are considered a clean and sustainable energy source, as they emit lower levels of greenhouse gases than fossil fuels. This has led to the adoption of wood pellets as a preferred fuel source. Thus, the demand for wood pellets is expected to rise during the forecast period, owing to growing awareness of renewable energy resources used in generating power and the high combustion of wood pellets, thereby driving the global wood fuels market during the forecast period.
Wood pellets was the largest segment of the market in 2024 and will continue to be the largest segment of the market in 2031, growing slower than the overall market (10.27%). It will grow at a compounded annual growth rate of 8.67% between 2023 and 2031. Wood pellets will be the slowest growing segment within the overall market and will grow from $9,049.32 million in 2024 to $13,711.15 million in 2031. Wood pellets will contribute 47.64% of the incremental growth in the overall market between 2023 and 2031. Wood pellets contributed 58.31% to the overall market in 2024 and will decrease its contribution to 54.18% of the global wood fuels market in 2031.
Market Geographical Share:
Europe will generate growth in all the years of the forecast period between 2025 and 2031. The year-on-year growth during this period will vary between 9.98% and 11.51%. Europe was the largest region in the market in 2023 and will continue to be the largest segment in 2031. It will grow at a compounded annual growth rate of 10.73% between 2025 and 2031, which is faster than that of the overall market. It will be the fastest growing region in the overall market and will grow from $8,638.06 million in 2023 to $14,378.72 million in 2031. It will contribute 58.66% to the incremental growth of the overall market between 2024 and 2031.
Europe contributed 55.66% to the global wood fuels market in 2024, and its contribution will increase to 56.82% in 2031.
The leading countries for the consumption of wood pellets were the UK, Italy, Germany, Denmark, Sweden, France, and Belgium. The consumption of wood fuels is primarily due to strict policies implemented to increase the share of renewables in the final energy consumption and to mitigate the consequences of climate change. European countries are highly dependent on fossil fuel imports, which leads to energy security issues and are affected by the constant fluctuation in oil prices. Therefore, to increase the alternatives for energy security, locally sourced wood fuels are being promoted in European countries. Strong policies are implemented to increase the use of wood fuels as a source of energy.
Locally sourced wood fuels are gaining popularity as they are made up of leftover wood materials, which increases energy security and can be used to generate heat and electricity.
In Europe, most buildings have installed individual boilers and use fossil fuels and electricity to meet their heating needs, which is necessary for cold climates, thereby increasing greenhouse gas (GHG) emissions. However, the constant increase in electricity and oil prices led to customers seeking alternative sources of energy to meet their heating needs. Wood fuels such as wood pellets are among the fastest-growing biomass carriers. They are used by residential, commercial, and industrial end-users.
Wood fuels are comparatively priced lower than the prices of heating oils, which makes them economical. As wood fuels are carbon neutral, they are environmentally friendly. Biomass is also made from local resources such as wood waste, thereby making them sustainable. It also reduces issues related to energy security, which in turn fuels the growth of the global wood fuels market during the forecast period.
Covid Impact Analysis
In 2020, the outbreak of COVID-19 compelled governments of various countries in the region, such as the UK, Italy, and Germany, to impose lockdowns to control the spread of the disease. The implementation of lockdown restrictions led to a halt in various construction projects. For example, Tees Renewable Energy Plant (Tees REP), a 299-megawatt (MW) biomass power plant in the UK, was paused in March 2020 due to the COVID-19 pandemic. Also, owing to disrupted supply chains, suppliers failed to distribute wood fuels to biomass power generation vendors, which led to a decline in revenue of the wood fuels market in Europe in 2020. However, as of early 2021, with the initiation of vaccination drives, the number of COVID-19 cases decreased in the region, which led to the lifting of lockdown restrictions. This has led to the reopening of commercial space and offices and the resumption of manufacturing operations and various construction activities. The European Council and Parliament negotiators reached a provisional political agreement to set a renewable energy target of 42.5% by 2030 with an additional 2.5% indicative top-up of 45%. The provisional settlement units have an indicative goal of at least a 49% renewable power proportion in homes in 2030. Moreover, the resumption of industrial activities and construction projects boosted the growth of the wood fuels market in 2022. Thus, the increasing awareness regarding the use of renewable energy sources for power generation is expected to fuel the growth of the regional wood fuels market during the forecast period.
Russia Ukraine War:
The Russia-Ukraine war has a significant impact on the regional wood fuels market. Ukraine is one of the largest producers of wood fuels in the world, and the conflict has disrupted supply chains and led to a decrease in production. This has resulted in higher prices for wood fuels, which are used as a renewable energy source in power plants. Additionally, the conflict has caused uncertainty in the market, leading to decreased investment and slower growth. Furthermore, Russia is a major producer of wood fuels, and the conflict has led to a decrease in the production of wood fuels. This has put additional pressure on the global wood fuels market, which has struggled to meet demand. As a result, some countries have turned to other sources of renewable energy, while others have looked to increase their production of wood fuels. The Russia-Ukraine war has led to disruptions in supply chains, higher prices, and decreased investment. Thus, due to the conflict, the regional wood fuels market is expected to witness slow growth during the forecast period.
