In this study, we examine the effects of the price for fossil fuel CO2 emissions on the use of wood in Europe. In particular, we assess the economic potential to substitute wood for coal in large scale heat and power production. We also review the impacts of increased energy wood usage on the forest industry and roundwood prices. The analysis is conducted with the European Forest and Agricultural Sector Optimization Model. We consider three scenarios, where carbon price remains at 20 €/tCO2, increases to 50 €/tCO2, or increases to 110 euro/tCO2 by 2040. It seems that a carbon price higher than 20 €/tCO2 is required to increase wood based energy production. At prices below 50 €/tCO2, energy wood consists mainly of forest chips, recycled wood, bark, and black liquor. At the carbon price of 50 €/tCO2, the use of wood for energy begins to compete with the use of wood in the forest industry. At the price of 110 €/tCO2, roughly one third of wood used in large scale heat and power production would also be suitable for material use. Even then, the contribution of wood based energy in reaching the EU RES target is modest, since the availability of wood limits its increased use in energy production.
