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Wood pellet production facilities have spread rapidly across the southeastern United States over the last decade, a market driven largely by electricity generators in Europe converting from coal-fired to wood pellet-fired boilers. This has raised concerns that non-timber values of southern U.S. forests are at risk and that CO2 emissions from burning carbon-based products will continue to exacerbate climate change. One element left out of the analysis regarding whether wood pellet market development is a net environmental positive or negative, however, is the likelihood that forestland will be converted to non-forest uses if Southern landowners do not have adequate markets into which to place their timber. Southerners rely heavily on forest products industries for economic well-being. Yet traditional forest product markets have contracted in recent years. At the same time, forestland has increasingly been purchased by real estate investment trusts, often resulting in conversion of forestland to non-forest uses. With fewer markets to turn to, forest owners are increasingly divesting forestland or converting it to other uses, and southern states will face a new phase of deforestation if current trends continue. This Article calls for the inclusion of an additional element within the assessment of whether wood pellet energy generation is a net environmental positive or negative—namely, whether the failure to develop such markets could contribute to forest conversions that will both reduce forest ecosystem services in the South and leave more carbon dioxide in the atmosphere than would utilization of southern forests as an energy source. This Article further briefly outlines some baseline policy responses needed to address environmental concerns raised regarding wood pellet market development if the market continues to expand.