The global wood pellets market was valued at US$ 13.3 Bn in 2024 and is projected to grow at a CAGR of 6.9% from 2025 to 2035, reaching approximately US$ 27.7 Bn by the end of the forecast period. Growth is primarily driven by rising decarbonization commitments, energy security concerns, and supportive renewable energy policies worldwide.

Wood pellets, produced from compressed sawdust, forestry residues, and agricultural by-products, have emerged as a key renewable energy source. Their high energy density, low moisture content, uniform size, and ease of transportation make them a practical substitute for coal and other fossil fuels in power generation and heating applications. As countries intensify efforts to reduce greenhouse gas emissions and achieve carbon neutrality, wood pellets are increasingly integrated into national energy strategies.

Government Policies and Renewable Energy Targets Driving Demand

Regulatory support remains the cornerstone of market growth. In Europe, the Renewable Energy Directive (RED II) mandates member states to increase the share of renewables in their energy mix, significantly boosting biomass utilization. Countries such as the U.K., Denmark, Sweden, Italy, and France have heavily adopted pellet-based heating and power systems.

Large-scale biomass facilities such as those operated by Drax Power Station have transitioned from coal to biomass, consuming millions of tons of pellets annually. This shift exemplifies how policy frameworks can accelerate industrial-scale adoption of renewable fuels.

Asia-Pacific is emerging as the fastest-growing region. Japan and South Korea have introduced feed-in tariffs (FIT) and Renewable Portfolio Standards (RPS), encouraging utilities to replace coal with biomass. Following its post-Fukushima energy diversification, Japan has significantly increased pellet imports to reduce reliance on nuclear and fossil fuels. Similarly, South Korea’s renewable mandates have driven steady growth in pellet consumption.

In India, co-firing mandates requiring thermal power plants near urban areas to blend biomass pellets with coal are expected to generate substantial incremental demand in the coming years.

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Industrial Segment Dominates Market Share

The industrial sector represents the largest end-use segment in the wood pellets market. Utilities and heavy industries are utilizing pellets for power generation and high-temperature industrial heating. Biomass co-firing offers a cost-effective pathway to reduce carbon emissions without requiring complete infrastructure replacement.

In addition to electricity generation, pellets are widely used in district heating networks across Scandinavia and Central Europe. Residential heating remains a strong segment in Italy, Germany, and France, where pellet stoves and boilers are increasingly common due to incentives and carbon taxation policies.

Regional Leadership and Trade Dynamics

Europe accounts for approximately 65% of global market share, supported by established infrastructure and stringent climate targets. North America plays a critical role as a leading supplier, leveraging abundant forestry resources and industrial-scale pellet production capacity to serve European and Asian markets.

Asia-Pacific continues to strengthen its position both as a producer and consumer. Vietnam and Malaysia have become major exporters, while China is scaling up production using agricultural residues.

Competitive Landscape

Major industry participants include Enviva Inc., one of the world’s largest industrial pellet manufacturers, and Drax Global, which operates a vertically integrated biomass supply chain. Other notable players such as Graanul Invest, Lignetics, TANAC, and Asia Biomass are expanding production capacities and enhancing supply chain efficiencies.

Recent restructuring efforts by Enviva and brand expansion initiatives by Graanul Invest highlight continued investment confidence in biomass energy.

Outlook

With sustained policy backing, growing industrial decarbonization initiatives, and rising concerns over energy security, the wood pellets market is poised for stable long-term growth. As nations diversify energy portfolios and prioritize sustainable fuel alternatives, wood pellets will remain a strategic component of the global renewable energy transition.