Wood pellet market restructuring under the European Union deforestation regulation: A dynamic spatial equilibrium analysis

Abstract

The European Union Deforestation Regulation (EUDR) requires plot-level geolocation and full supply chain traceability—requirements that pose distinctive challenges for pellet supply chains where fiber origins cannot be distinguished after blending. We use a dynamic spatial equilibrium model covering fourteen regions to assess how these compliance requirements affect global wood pellet production, prices, and trade from 2026 to 2030. We compare four policy scenarios—EU-only and joint EU-UK implementation, each with static or rising compliance costs—against a no-regulation baseline. Results show that the U.S. Southeast faces the largest production decline, reaching 7.2% by 2030 under joint EU-UK implementation, while EU and UK producers expand output by 1.6–7.1% through import substitution. Correspondingly, producer prices fall 7.9% in the U.S. Southeast but rise 2.6–4.6% within the EU and UK. The primary market response is trade diversion rather than demand destruction: U.S. exports to the EU fall 22–36%, while Vietnamese exports to non-EU Asian markets rise 24–28%. Global production contracts only 1.7% under the strictest scenario, while trade contracts 7.5%. These findings suggest that the EUDR functions mainly as a trade-restructuring policy that increases traceability within European bioenergy supply chains but may have limited effect on global deforestation pressure due to leakage to less-regulated markets.

Citation

Guo, Jinggang; Prestemon, Jeffrey P.; Henderson, Jesse D. 2026. Wood pellet market restructuring under the European Union deforestation regulation: A dynamic spatial equilibrium analysis. Biomass and Bioenergy, 213: 109427. https://doi.org/10.1016/j.biombioe.2026.109427