From log to furnace: how pellets are made

How to count carbon

Every month, a great red-and-blue striped liner almost the length of two football pitches makes a circular route across the North Sea. This is the MV Imavere, Graanul Invest’s own ship, named after its first pellet plant. The MV Imavere can carry 30,000 tonnes of wood, crushed and made into pellets. By the time it has travelled from the port of Riga and hit the shores of Denmark and England, those pellets have magically become carbon neutral. When they get to Western power stations to be burned for electricity, they do not count towards those companies’ emissions at all.

How? To solve this magic trick, we must go back to 1990, when the UN’s Intergovernmental Panel on Climate Change (IPCC) devised an accounting system to measure planet-warming pollutants in the atmosphere.

This was the birth of European climate policy, when EU leaders agreed for the first time that rising greenhouse gas emissions threatened humanity. They made an historic agreement: levels of polluting gasses needed to be maintained at 1990 levels by 2000. But carbon dioxide emissions had never been counted before. The politicians realised that there was a danger they would be counted twice: once when the trees or other crops are cut down by foresters or farmers, and again when they are burned, for example by power companies. So they made a decision: only land users – like farmers and foresters – would count their carbon emissions. For the end user – the power station, in this case – the carbon dioxide effectively disappeared. Today, energy companies are still exempt from counting carbon emissions when they burn wood.

Then the leaders made a second decision: land users should count carbon by looking at changes to forest cover, rather than measuring how much wood had been cut down. Graanul Invest, for example, replants its land with tiny spruces, even though these young trees will not reabsorb carbon emitted by burning the old trees for decades – a problem known as carbon debt.

Under this second rule, forests can continually be exploited, because, it is reasoned, trees will be planted to reabsorb the carbon dioxide emitted when older trees are felled and burned in power plants. Following this logic, biomass is seen as an inherently carbon neutral energy source. But scientists like Massimiliano Patierno, Environmental Engineer at the International Institute of Law and Environment, have pointed out that unlike corn and other crops, it takes decades or even centuries for whole trees to regrow. “If we count a period of, say, 40 years, in which the new trees have canceled the carbon debt, then yes that biomass can be seen as carbon neutral,” he says. "But if we consider a very short period of time, it is likely that the carbon debt will not be canceled.”

Others have pointed out that burning the forest actually speeds up the transmission of carbon dioxide into the atmosphere. Mary Booth from the Partnership for Policy Integrity, a lobby group, says that if the same wood or forestry residues were left to decompose on the soil, it would emit carbon dioxide more gradually. “The accumulated net impact of such emissions likewise speeds warming,” she says. By accelerating carbon dioxide emissions in the short term, burning wood for electricity could be fatal for states’ ability to meet the Paris Agreement goal of keeping global warming to well below 2 degrees centigrade by 2050.

The IPCC gave their two rules a health warning. “The IPCC approach of not including these emissions in the energy sector total should not be interpreted as a conclusion about the sustainability or carbon neutrality of bioenergy,” it said in the FAQ that came with the guidelines. But thirty years later, these two rules have inadvertently laid the foundations for the renewable energy policies – and the explosion of the biomass trade – that has followed.

Biomass, of which wood from forests is the main source, now makes up almost 60 per cent of the EU’s renewable energy, more than solar and wind combined. While the consumption of woody biomass in European power plants is considered carbon neutral, in the short term, burning wood actually emits more carbon dioxide than coal.

All along the route, from the forests to the furnace, a chain of vested interests has emerged: a multimillion dollar lobby in the European Parliament, battling for the ear of energy ministers. Politicians in Baltic states who, as recently as November, wrote to EU climate commissioners to defend the status quo on behalf of forest-rich companies. And businessmen on both sides of the ocean, with profits to defend. In the middle, over lunch in a small English town, we meet a scientist who discovered the hard way how the science itself has become collateral for these competing interests.

“The summary was neutered!”

In September, just as the UK summer is cooling, a climate scientist, wearing a regulation forest-green fleece, heads to church in a charming English town for lunch.

Robert Matthews knows a thing or two about forests. He is science group leader at Forest Research, a UK governmental research agency in the UK based in Farnham, a leafy Surrey town surrounded by woods. In 2015, Matthews led a team that assessed the impact of using wood for heat and electricity generation on carbon dioxide emissions for the European Commission. This was a critical moment for the EU. The research would inform a revision of the Renewable Energy Directive. The new directive would, for the first time, set out sustainability criteria that could be applied to woody biomass. Scientists and environmentalists, sensing their moment, appealed to policy-makers to restrict pellet makers to using only waste, produced in sawmills and on farms, which they argued was more sustainable than cutting down and burning round, virgin trees.

Robert Matthews is a climate scientist whose research became an unlikely battleground in debate over biomass during the revision of the Renewable Energy Directive.

Photo: Viktoria Szendrődi

This research would underpin the policy. Over a modest lunch of vegetarian cottage pie and half a boiled egg in the Farnham church cafe, Matthews, a softly spoken man who calls himself "just a climate scientist who counts carbon molecules" describes how his report became an unlikely battleground in the debate. Discussion centred on one chart, since described by various stakeholders as “famous” and “notorious”. The chart shows how carbon emissions in the EU would change between 2010 and 2050 depending on the EU policy for biomass: whether it came from agriculture or the forest, and whether it was domestic or imported. And in all these scenarios, the six rainbow coloured lines showed a decrease in total annual greenhouse gas emissions over time.

The graph became a Pandora’s box of questions, comments, claims and counter-claims. The commissioning officers wanted to know what counted as “good” and “bad” bioenergy sources. The question was so hot that Matthews and his team were invited to an EU research facility in Ispra, Italy, where they were cross-examined by policy makers. When the report was finally published, the authors were dismayed to discover that it was being interpreted in different ways depending on who was reading it. Some readers said it meant that biomass increased emissions, some said that there was no need to worry about it at all. Others worried about whether it came from agriculture or forests, and others about whether or not it had been imported. Matthews was glad of the opportunity to write a second report with funds from the European Climate Foundation in 2018, with an almost identical title, to try and provide clarity on the first.

Meanwhile, environmentalists watched in horror as the report was used to justify existing policy. “The summary was neutered,” Alex Mason from the World Wildlife Foundation says. “If you don't read the rest of the report, the high-level message from the summary is that biomass is fine.”

At the last minute, 800 scientists wrote to the European Parliament stating that the directive risked letting countries, power plants and factories claim credit toward renewable energy targets for deliberately cutting down trees to burn them for energy. The solution, they said, should be to restrict the forest biomass eligible under the directive to residues and wastes, which have a much shorter carbon payback time, or carbon debt period, than entire trees.

But the qualifier never made it into the regulation. We asked Giulio Volpi, the policy coordinator who had commissioned Matthews’ report what the executive summary showed. “The report confirms that the contributions made by bioenergy towards net [greenhouse gas] emissions savings in 2030 are generally beneficial,” he wrote in an email. The only exception, he noted, was for imported forest biomass, which could lead to “a moderate net increase in greenhouse gas emissions”.

“That is wrong,” Matthews says. “I’m a little disappointed that the message of ‘don’t use imported wood’ is the conclusion being taken away. This is exactly the message I wanted to contradict.” In the second report, Matthews set out 15 criteria for sustainable biomass. He said sources that allowed deforestation should be banned, and supplies from whole tree stems should be restricted to small, young trees. None of his criteria were about imports.

In 2015, that message never got through. When it was time for policy-makers to vote on what kind of wood should be allowed to be included in the revised Renewable Energy Directive, Miguel Arias Cañete, then climate and energy commissioner, warned MEPs not to vote to exclude whole trees “as it would require all forest biomass use in the energy sector to be certified”.

So it came to pass. The Renewable Energy Directive increased the amount of energy states must get from renewable sources to 32 per cent by 2030. It put no limits on the kind of wood states can burn as "renewable" fuel – neither where it comes from nor the use of whole, virgin trees.

But no one could have foreseen the explosion of the biomass industry that followed. "If you're in a situation where you are encouraging mature forests to be felled, and every single gram of wood to be burned in a power station, that is not a good outcome," Matthews says. "I guess what you're saying is, could it happen? I'm willing to believe it could be happening. But I would almost like to be physically taken where it's happening and see it for my own eyes."

When harvesters come to the forest

We travel south through the Haanja Nature Park in Estonia, passing small villages made up of wooden houses, wide, black lakes, and cows grazing in pastures. On a crossing with a sign showing the direction towards a village called Vakari, we take a left passing wetlands surrounded by birch trees.

Suddenly, our van turns onto a stretch of road in a clearing, as if someone has carefully cut out rectangles of forest. A sign says the plot is owned by Valga Puu, a subsidiary of Graanul Invest. A few trees stand sentinel, part of the forest owners' duty to leave some old trees in the ground.

Our guide Siim Kuresoo has worked for the Estonia Fund for Nature, a non-profit that fights for the preservation of forests and biodiversity, since 2004. Valga Puu started to cut down trees here from 2016, shortly after Estonia adjusted the parks conservation act to allow whole areas to be cut down in Haanja's Natura 2000 areas. Tree-cover loss per hectare in Estonia's Natura 2000 areas has increased at a more rapid pace since the government loosened laws to allow logging in the Haanja Nature Park in 2015, data from Global Forest Watch, a resource set up in 1997 by a network of nonprofits, shows. Across the whole of Haanja Nature Park, more than 100 hectares of forest have been felled on land owned by Graanul Invest since 2016, a significant increase compared with the previous five years, when less than 20 hectares was felled between 2010 and 2015, data from Global Forest Watch suggests. We cross-checked this data with hi-resolution satellite images from Google Earth. On paper Estonia’s forest stock seems to be stable and even slightly increasing, according to Estonia’s 2020 Forest Resources Assessment (FRA), an account of forests in the country. On the ground, we found the areas that had been felled had been replanted with small spruces, which counts towards forest area even though the spruces will take decades to absorb the same amount of carbon as the felled tree. These “temporarily unstocked or recently regenerated” forests have increased more than 20 per cent since 2010, the FRA says, with serious consequences for the capacity of Estonian land to store carbon. The Estonian land sector is expected to switch from being a sink to an emitter of carbon by 2030, according to Estonia’s National Energy and Climate report.

This situation has been replicated across the whole of Estonia. Between 2001 and 2019, Estonia’s EU-protected mainland areas lost 15,000 hectares of forest cover, according to data collected by Global Forest Watch, an area more than twice the size of Manhattan. The last five years account for 80 per cent of the lost forest cover since 2001. Between 2009 and 2018, the Estonian government granted felling permission on approximately 60,000 hectares in Natura 2000 areas, including felling to meet conservation objectives. Since 2015, Estonia’s parks and conservation act has been altered to allow for more clear-cutting. Further alterations to the act are planned.

Graanul Invest says that even after the park conservation act was adjusted to allow clear cutting in Haanja Nature Park, the principle of foresting Natura 2000 areas did not change. “In 2015 the conservation act for Haanja Nature Park was revised only for buffer zones and not for high conservation zones,” a spokesperson said. The fact that conditional clear-cutting of up to one hectare is allowed in Haanja park does not change how much its forest management companies cut down, the Graanul Invest spokesperson said, it just makes it “more efficient”.

In addition to revenue from clear-cutting to produce pellets, Valga Puu receives EU subsidies for owning this land under the Natura 2000 regulations, due to restrictions on what it can do under the birds and habitats directives. In 2020, Valga Puu received €60,000 from this one subsidy. "The fact that companies basically receive funding for logging in protected areas like this is outrageous," Liis Kuresoo, Siim’s sister and Estonian Fund for Nature colleague, says.

The daily grind: outside Osula pellet factory

Some of the so-called low-quality wood that leaves the Haanja Nature Park is carried on trucks to the nearest pellet factory, Graanul Invest’s Osula. When it was built in 2014, Osula was celebrated as the largest pellet plant in the Baltics, capable of producing 250,000 tonnes of pellets a year. By 2019, production had ramped up to more than 350,000 tonnes, according to Osula Graanul OÜ’s annual report. The company states that, in the second half of 2019, it imported large amounts of raw material from Latvia to keep the factory running near maximum productivity.

The plant holds a biomass producer certificate from the Sustainable Biomass Program (SBP). Under this certificate, the plant pledges to only use wood that itself holds certifications from the Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC). Both of these certificates are for “controlled wood”, which means that FSC wood can be mixed with other, legally-sourced wood, but does not apply any rules to how the forest is managed. Rather than adding extra requirements on top of the existing rules, the Sustainable Biomass Program regional risk assessment says that local laws cover sustainability issues, such as protection of forests and other areas with high conservation values.

The Sustainable Biomass Program uses data from a regional risk assessment in 2016, although much of the data used is even older. This assessment also covers all Estonian forests, regardless of whether the land is protected or not, since the program says Estonia’s forest land is homogenous. The Estonian Fund for Nature provided feedback – including a suggestion to change the risk indicator around rare species, like the Siberian Flying Squirrel, but this was dismissed.

Certification may be concealing the increasingly unsustainable way that Baltic forests are managed, according to a December report by the Estonian Fund for Nature and the Latvian Ornithological Society. Even the most widely recognised forest management certification scheme, the Forest Stewardship Council permits forest-owners to clearcut large areas. In 2016, the FSC appealed to governments and businesses to establish “strict, enforceable requirements for the use of biomass for energy production that lead to a genuine, quantified reduction of greenhouse gas emissions compared to fossil fuel use”. So far, that hasn’t happened.

Academics and campaigners believe that the number of certifications around biomass have created less, rather than more, transparency in the chain.

Esther Turnhout, professor in politics of environmental knowledge at Wageningen University, says the complexity of the current system makes it vulnerable to fraud. “Woody biomass is a bulk product: there are multiple sources which are all mixed together,” she says. She describes the mixing of different sources as a kind of octopus, where some tentacles can be inspected, but sustainability can not be assured for every one. She says Europe-wide scheme – plus a system of rewarding good behaviour – is necessary to police the trade.

"Unfortunately the market has been disharmonised,” says Mihkel Jugaste, head of quality and certification at Graanul Invest. “We very much hope that the European Commission and the revised Renewable Energy Directive will fix this soon."

Mihkel Jugaste, head of quality and certification at Graanul Invest, agrees that the market has been disharmonised: “We very much hope that the European Commission and the revised Renewable Energy Directive will fix this soon."

But stronger certification systems can have unexpected consequences. The Stimulering Duurzame Energie (promotion of sustainable energy, or SDE+) system the Netherlands used to cut out wood from what it deems to be “bad” sources, for example, works to the benefit of the biggest pellet manufacturers, who can afford the expensive process of getting certified. "It is important to point out that SDE+ requirements are a huge burden,” says Mihkel Jugaste, head of quality and certification at Graanul Invest. “Smaller producers and small forest owners do not have the resources and skills to comply with these criteria.”

Marku Lamp, of the Estonian ministry of environment, agrees that the system unfairly prioritises those who can pay. "These certificates were created to keep the rainforests from disappearing, but the areas that are certified are mostly in Northern America and Europe – where people can afford it."

The winds of change

There are signs that the EU intends to tighten the rules around what can be harvested as biomass. In 2020, an expert group on sustainable finance at the EU recommended that biomass should only be considered sustainable by the bloc if it comes from feedstocks listed in an annex of the Renewable Energy Directive, including bark and sawdust, and “pre-commercial forest thinnings”, apart from sawn logs. The European Commission now has to decide whether to accept these recommendations, which will be used to as screening criteria for hundreds of billions of future “green” investments.

In May, the EU published a Biodiversity Strategy stating that primary and old-growth forests “are the richest forest ecosystems and keep removing carbon from the atmosphere, while storing significant carbon stocks, including in forest soils”. The use of whole trees, and food and feed crops, whether produced in the EU or imported, for energy production “should be minimised”, it recommends.

Kalev Järvik stands on a tree stump and surveys an area that was recently logged near his home.

Photo: Liis Treimann, Äripäev

Graanul Invest says if we want to use wood as low carbon material in other fields of life, then it makes sense to use the residual streams from forestry and wood industry for useful applications – including energy. But campaigners say we simply don’t have time to be cutting down trees for energy production if we are going to meet climate goals. At the Haanja Nature Park, Siim Kuresoo says it will take many decades for the trees that have been felled to date to grow back to their former size. "This idea of carbon neutrality is a fairy tale story,” he adds. "Climate change is already happening. We should be planting trees, instead of taking them down."

But Kirjanen insists his company, Graanul Invest, is not doing anything out of the ordinary. Almost all Europe’s existing forests are the result of “forest management” of a similar kind, he says. “If we want our forests to be like this in the future, they must be managed,” he writes. “Many protected areas in national parks are semi-natural communities, and without maintenance, conservation values often disappear.”

For Kalev Järvik, who has lived near the Haanja Nature Park for much of his life, forest management of the kind Graanul Invest practices has scarred the land. "It seems to me this is some kind of competition [over the forest]," he says, standing on a tree stump, surviving the park. "I don't get it. I wouldn't be in front of the camera if I could be hiding in the woods. But you can see me standing here: there are no trees to hide behind anymore."