One grey November day, a man stands on a bald piece of land in the heart of the Haanja Nature Park, in Estonia's southern Võru County, and remembers when he could walk straight from one side of the park to the other under a canopy of trees.
Kalev Järvik has lived in the Haanja uplands for more than 10 years. His closeness to the forest has shaped his life as a carpenter and the fortunes of the surrounding villages, with their handicraft traditions – a substitute to farming on the poor arable land. Upcountry, travel literature promotes the forest to city-dwellers, promising the ancient woodland as a place to rest and reinvigorate the mind.
At the beginning of 2015, the Estonian government adjusted the park conservation act to allow clear-cutting of trees in the Haanja Nature Park as demand for wood in Western Europe soared – not just for furniture or construction, but because of an unlikely culprit: Europe's renewable energy policies.
“You don’t want to leave home, because the landscape has become so impassable it leaves you feeling anguished.”
Estonia calls itself "the country of organic forests". But Järvik tells a different story. He stands by a freshly cut down forest, stripped of trees by Valga Puu, a subsidiary of Graanul Invest Group. The days he is spared from the sound of harvesters have become rare.
"Sometimes I can't bear to go outside," he says. "You don’t want to leave home, because the landscape has become so impassable it leaves you feeling anguished. But still, the noise comes."
For centuries, biomass in the form of firewood has been used by humans to cook and heat homes. Demand for wood helped drive the near-obliteration of Western Europe’s forests by the middle of the nineteenth century.
The discovery of coal – a more efficient, less carbon-intensive fuel – halted this rapid deforestation. Yet as countries switch out of fossil fuels to meet climate goals and renewable energy targets set out by the European Union, they are replacing them not just with solar and wind, but by going back to burning wood to generate electricity on an industrial scale.
This is a story that traces an explosion of lucrative subsidies and sustainability certifications as pellets have become big business in Europe
Scientists agree that burning wood releases more carbon dioxide than coal. But woody biomass, as it is known in the trade, has been branded carbon neutral. Governments can count it among the renewable energy sources that they must get 32 per cent of their energy from by 2030, under the EU's Renewable Energy Directive.
The story of how wood got branded carbon neutral will take us from the halls of power in Brussels, to the major Baltic ports, to the smokestacks of the Netherlands and Northern England. It is a story that traces an explosion of lucrative subsidies and sustainability certifications as pellets have become big business in Europe. But that story starts here in Estonia, in a forest owned by Europe's biggest pellet producer: Graanul Invest Group.
For one of Estonia's richest men, lockdown has come as light relief.
When Raul Kirjanen founded Graanul Invest in 2003, it was just him and his computer in a small office. By 2005, the company had opened its first factory in Imavere, Estonia, compressing sawdust and the waste wood from other processes into tiny pellets that could be bagged up and shipped overseas for burning in everything from domestic heaters, to power plants to make electricity.
Business is booming
Today, business is booming. In 2019, Graanul made 2.5 million tonnes of pellets, up from 1.8 million tonnes in 2018, across plants in Latvia, Lithuania, Estonia and the US. It exports 98 per cent to target markets including the UK, Denmark, the Netherlands and Italy.
In the process, Kirjanen, who owns more than 50 per cent of the company, has risen up the ranks of Estonia's richest men. He sits at number four with assets worth more than €350 million in 2020, a 25 per cent increase since 2019 alone.
"I used to leave the country twice a week, with flights leaving at 5am," Kirjanen told the Estonian daily newspaper Postimees in June. "I don’t know how long this glorious isolation will last, but I’m enjoying it for the time being."
Kirjanen declined to be interviewed face to face, citing Coronavirus. In an email, he told us that the Estonian timber industry is “awesome”, adding that it is the largest employer in rural areas, and that it has been able to “survive, develop and grow to become an international competitor”.
While Kirjanen lays low, trucks full of pellets continue to leave from the mills of Estonia, Latvia and Lithuania to Baltic ports, where they are shipped across the seas to Denmark, the Netherlands and the UK. The UK is Graanul Invest’s biggest trading partner, accounting for more than a third of its revenue in 2019. When the cargo reaches Western shores, it is transferred onto smaller cargo ships, trucks and trains to reach its final destination: western European power plants, to keep the lights on and the televisions working as lockdown confines millions of other, more ordinary people in their homes.
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.
Carbon dioxide emissions had never been counted before
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.
It takes decades or even centuries for whole trees to regrow
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.
Burning wood for electricity could be fatal for states’ ability to meet their Paris Agreement goal
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.
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.
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 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."
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.
CO2 emissions and tree and biomass loss in Natura 2000 protected areas listed for EstoniaAbout the dataset
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 latest felling in the Haanja Nature Park took place recently, Siim Kuresoo says. Google street view images show that in 2011, this road was surrounded by a mixed forest of birch and pine, with wildflowers and a diverse understory that provides cover for small mammal and birds. When we went there to make a panorama in 2020, the view was very different. “Generally, the more diverse the forest (more different species, different layers), the more different animals and plants it can host,” says Ziga Malek, assistant professor in land use and ecosystem dynamics, Vrije Universiteit Amsterdam.
When we went there to make a panorama in 2020, it showed evidence of clear cutting. “The plants that thrive in shady areas will likely not grow in a cleared area,” Malek says. “The vegetation that had been there before protected the soil from being eroded, and buffered water runoff. While the specification of the Natura 2000 network says that clear felling can be allowed, it ideally should not be in conflict with site-specific conservation objectives, which in this case would mean minimum disturbance – which these are not.”
We stop on the side of the road and follow the deep truck tracks leading up a hill on foot, Kuresoo’s boots sinking into the mud as we climb. In the distance, we can hear machines. When harvesters come to the forest, 98 per cent all of the work is automated. Locals find formerly forested areas churned up and impossible to cross.
On the spot we notice a little fen that has been damaged by heavy machinery. Peatlands cover around a quarter of Estonia and act as significant carbon sinks. Andres Olesk, chief executive of Valga Puu, says that this damage was done by mistake while preparing the land for replanting, as the workman did not look at the map carefully enough. This is ancient forest land, Olesk says, adding that since Valga Puu works on thousands of hectares of land every year, mistakes sometimes happen.
Google streetview images from 2011 show dense forest either side of the road.
We took a panorama in November showing clear-cutting on either side of the road.
Once we get beyond the bog, Kuresoo tells us that the area that has been felled is roughly the size of 10 football pitches. “This is a typical sight around here,” he says. Under Estonian law, this kind of clear-cutting, leaving only a few trees, is allowed, as long as it does not undermine the overall objective of the protected area. Around 14 per cent of Estonian forests are under strict protection, according to the Estonian government, and this area is growing. Raul Kirjanen, chief executive of Graanul Invest, says that Estonia has one of the toughest forest laws in Europe. But Estonian Fund for Nature argues that felling trees in areas like this one, which are part of the EU’s network of Natura 2000 sites, is against the EU Habitats Directive. The cut forest was 70 years old, Kuresoo says, and home to a number of different animals. Clear cutting is partly responsible for a reduction in the number of breeding pairs of forest birds in Estonia by 50,000 every year, according to the 2020 Estonian Fund for Nature report.
Graanul Invest says it is increasing the volume of its forests to improve how much carbon it can store – and to improve the availability of raw material for wooden products. The company planted 1.5 million mostly coniferous trees in 2019. But Malek, from Institute for Environmental Studies, Vrije Universiteit Amsterdam, says that evidence shows that mature and closer-to-natural forests sequester more carbon in the long run, due to a more healthy ground biomass. “Even if the clear-cut area is planted with one fast growing species, it will not be as effective in terms of carbon sink as the more nature-like forest would in the long term,” he says. “While planted forests can provide climate benefits, they definitely cannot fully replace the lost forest ecosystem. Altering the type of forest, either with species or intensity of use, would very likely result in a forest that can host fewer animals and is generally less diverse.”
“The forests in this area are being transformed to suit the business of their owners”
Indrek Tammekänd, an ornithologist and conservation biologist, has joined us on the ground for our trip. "Clear-cutting has been allowed in several restricted zones of protected areas, which is drastically showing everywhere in landscapes," he says. The forests in this area are being transformed to suit the business of their owners, he adds.
In neighbouring Latvia, where Graanul Invest owns six pellet factories, Viersturs Kerus, head of the Latvian Ornithological Society, has also raised the alarm. In 2019, total logging in Latvia reached 13 million square metres, the highest volume on record. “Cutting down middle-aged forests narrows the living space of forest-related species,” Kerus says. “The task of forest management should be to provide more than just wood.”
In 2019, Council of Estonian Environmental Nongovernmental Organisations filed a complaint with the European Commission's department for environment, claiming that "Estonia has failed to transpose the requirements for assessing the logging activities impacts on Natura 2000 habitats foreseen in EU Habitat Directive." The fund found that this had led to controversial logging permits being issued to more than 80,000 hectares overlapping Natura 2000 areas, and 60,000 hectares which overlap forests designated of pan-European importance.
Valga Puu says that clear cutting up to a hectare at a time in Haanja Nature Park is allowed, because it’s the most effective way to maintain the forests. “Nature conservation and forest management actually go hand in hand,” Andres Olesk, chief executive of Valga Puu, tells us in the days following our visit. He insists that the pellet business does not impact how much forest is cut down – just the need to manage the landscape: “In nature parks, we have agreed the principle that the timber industry doesn’t come first.”
Graanul Invest told us that its pellet companies do not harvest forests to make pellets. “When forests are managed then the main target is to harvest high quality logs for sawmills or plywood industry, then to pulp mills and only material that is not suitable for other industries comes to pellet production,” a spokesperson said.
But Valga Puu’s annual results tell a different story. “Our goals for 2020 are related to the supply of Graanul Invest plants,” the company says in its latest annual report. We put this to Olesk. “Not the best wording,” he responded.
An open case
Since the revised Renewable Energy Directive and Estonian legislation does not ban the use of whole trees, Graanul Invest can harvest hectares of forests to turn into pellets in the name of sustainable management. Graanul collects 84 per cent of its wood by clear-cutting, according to its 2019 sustainability report. The company says this allows forests to renew most quickly, as all the replanted trees grow together at the same rate.
The 2009 directive defined wood pellets as “generally consisting of processing residues from forest-based industries”. But Graanul Invest says in its 2020 sustainability report that more than a third of its wood comes from roundwood, or trunks of trees that do not fit the criteria for other industries. Around 40 per cent of the wood Graanul crushes into pellets comes from whole trees that are "not compliant with the requirements of the sawmill and plywood industries", the company says. It blames limited management by previous owners of the forests for what it calls the “non-compliance” of the trees. Much of Estonia’s woodland grew naturally around seventy years ago, on farmland left behind by many thousands of Estonians who were killed or deported from rural areas during the Second World War. "The share of low quality timber in Estonian forests has always been high due to the fact that during the Soviet era the forests were not managed at all," Marku Lamp, deputy chancellor of the Ministry of the Environment, says. "So this has in some ways an opportunity to sell the low quality stock."
Size and diameter
But environmentalists and scientists take a different view. Almuth Ernsting, the founder of UK-based climate activist group Biofuelwatch says the terms "low value wood" and "forestry residues" are based on economic considerations only. Ernsting says: “[They] take no account of the ecological, climate or cultural value of the trees.”
Robert Matthews, the scientist that wrote the research underpinning the revised Renewable Energy Directive, describes the idea of low-quality wood as “the sting in the tail”. “What is low-quality wood?” he says. “It’s almost like a get out of jail free card.”
How one community saved its trees
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
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."
Stronger certification systems can have unexpected consequences
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."
In the North of England, 12 cooling towers mark the site of a power station that produced 5 per cent of the UK's electricity in 2019, enough to power the whole of the North East.
This is Drax, the UK's largest power station. It was built as a coal-fired power station in the seventies and started producing electricity by mixing wood with coal from 2003. Since 2018, four of its six units burn only wood, fuelled by subsidies that made up 17 per cent of Drax's €4.7 billion (£4.2 billion) revenues in 2019.
Drax is the biggest biomass plant in the world. To make electricity production from wood pellets financially sustainable, the UK government pays it billions in subsidies – equivalent to €2.4 million (£2.1 million) a day in 2019. Drax will have received more than €11.2 billion (£10 billion) from the UK government since its conversion to biomass in 2012 until subsidies run out in 2027, researchers from the climate think tank Ember have calculated. To make its business model work after 2027, Drax has been sourcing even cheaper sources of biomass, expanding on its production facilities in the US and Canada, where it sources most of its wood. A spokesperson for Drax says the company is confident of its biomass sustainability, since Drax is independently audited and its biomass complies with standards set by the EU and British regulations set out by the UK government and overseen by independent regulator Ofgem.
In 2019, Drax imported around 12 per cent of Estonia’s annual export of wood pellets. Drax says that 10 per cent of the pellets it uses from Estonia come from low-grade roundwood, or trunks of trees like the ones we saw outside the Osula pellet factory, and 40 per cent from sawdust and other waste. Graanul Invest, meanwhile, says that 40 per cent of its pellets come from low-grade trees. Jugaste, Graanul Invest’s head of quality and certification, says that it would be too expensive to separate pellets made from whole trees – for example if a client demanded pellets made only of waste wood. “Physical segregation is even less feasible [than monitoring sustainability] and would increase production energy demand significantly,” he says.
Drax is not alone. Across Europe, governments have stacked up subsidies to help power companies make the switch from burning coal and other fossil fuels to burning wood. In the Netherlands, the government has paid energy companies RWE, Uniper and Onyx (formerly Engie) more than €3.5 billion in subsidies to use biomass, making the country one of the biggest importers of wood pellets in Europe.
“Biomass only exists at the scale that it does because of subsidies,” says Duncan Brack, associate fellow at the London-based think tank Chatham House. “We’re effectively paying to increase carbon emissions in the atmosphere, which is an absurd use of public money.”
(in € bn)
Demand for wood to burn in power plants is expected to grow for as long as biomass is counted as renewable
Demand for wood to burn in power plants is expected to grow for as long as biomass is counted as renewable. Industrial demand for pellets in the EU will increase by 1.6 million tons this year and reach 20.3 million tons in 2022, according to an estimation by Bioenergy Europe, the biggest association of bioenergy lobbyists. If planned conversions of several European coal plants to biomass are completed, London-based think tank Ember predicts global demand will hit 36 million tonnes of pellets, equal to total current global production.
While biomass consumers are quick to point out that Europe's forest cover is increasing, the reduced capacity of saplings to sequester carbon means that between 2021 and 2026, the EU's forest sink, or its ability to take carbon out the atmosphere and turn it into wood, will decline by 11 per cent compared to the average forest sink between 2016 and 2018, a report by the lobby group the Partnership for Policy Integrity shows.
Gert-Jan Nabuurs, professor of European forests at Wageningen University in the Netherlands, has also noted that the ability of European forests to absorb carbon is showing signs of decline. “This is partly due to the forests getting older, and partly to a slight increase in felling after the 2009 economic crisis of around six to seven per cent,” he says. “We need to evaluate how to reverse this trend through investing in our forests and policy.”
The European Environment Agency has warned that the ratio of forest felling to increment, which must be around 70 per cent to ensure the sustainable management of forests, is expected to increase during the coming years. The Estonian National Energy and Climate Plan forecasts that “in the near future” the capacity of the country’s forests to store carbon will “reach its peak and then start to decline”. After 2030, the forest sector is expected to switch from being a carbon sink to producing carbon dioxide emissions.
Campaigners are anxiously watching the situation in Germany, where Onyx Power, a subsidiary of the US hedge fund Riverstone, is examining the possibility to convert two plants in Germany from coal to biomass, after buying a coal plant with plans to co-fire in the Netherlands. This could mark the entry of Germany into the industrial large-scale electricity generation from biomass, demand for which would have to be met from imports. Lawmakers are still hesitant to open subsidies to plant operators aiming at a conversion. With the decided exit from coal in 2038, however, the pressure on the government is growing.
This is all happening despite the fact that some governments have admitted the problems of subsidising the industrial use of biomass. Drax's government subsidies for woody biomass will end in 2027, but Drax has no plans to stop burning wood. “Primarily we’re going to reduce the costs of our biomass through a range of measures, such as increasing self supply, using different feedstocks and reducing costs in our supply chain,” a spokesperson for Drax said.
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.
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."
Money to Burn is an investigation by a team of journalists and European newsrooms, led by Argos and funded by Investigative Journalism for Europe. For a period of three months, our cross-border team looked into everything related to the biomass trade, from subsidies, to certifications, to the European lobby, after learning from a colleague in Tallinn that Estonia was exporting almost all of its pellets overseas, with increasing impact on the country’s forests. The result is the cross-border story you see here, plus a series of radio, print and online publications in our partner media.
Our collaboration rested on the principle of radical sharing. For a period of three months, each reporter and each participating newsroom used a custom-built, open-source platform to share research, interview transcripts and data. At the final phase of the project, a smaller team met in Tallinn, Estonia, to corroborate what we could see using satellite imagery with on-the-ground reporting and to collaborate with local designers and film-makers to tell the story over a five-day sprint.