Unlocking the transition for wood and biomass industries
An analysis of five structural shifts
The European wood and biomass market is entering a new era characterized by increasing competition for resources, tightening supply, and the growing economic value of carbon. In this, companies need clear vision, regulatory readiness, and strong supply strategies to stay sustainable. AFRY supports in unlocking this transition, turning challenges into advantages.
By Benedikt von Waldburg-Zeil and Thais Morgenstern, AFRY Management Consulting
Alongside limited supply, the transition to a low carbon economy is profoundly reshaping the wood and biomass markets. Traditional sectors, such as wood-based panels, sawmill, pulp and paper, and energy are now competing directly with emerging industries supported by climate policies, renewable energy mandates, and growing demand for carbon removal solutions. At the same time, regulatory changes, climate impacts, and sustainability restrictions are transforming resource availability and increasing unpredictability. In this context, ensuring continuous and sustainable access to wood and biomass has become one of the greatest strategic challenges for companies in Europe.
Why the wood and biomass debate is at a critical turning point
Biomass has never been as central to discussions about energy security, decarbonization, and the future of sustainable materials as it is today. Yet at the same time, supply is becoming increasingly limited, especially in Europe, where conservation policies, mobilization challenges, biodiversity targets, and stricter forest management rules constrain availability. Unlike previous biomass market cycles, supply expansion in Europe is increasingly constrained by sustainability requirements, land-use policies, and limited forest growth potential. Extreme weather events such as droughts, storms, and pest outbreaks further increase production volatility and unpredictability. Structural changes in forest ownership – including the consolidation of holdings by large companies and the overall reduction in forest owner size driven by demographic change – are increasingly hindering the mobilization of wood and biomass volumes.
This scenario is compounded by new regulatory requirements such as RED III, EUDR, CSRD, and ESG frameworks, e.g. the GRI Standards, which establish more rigorous standards for traceability, data transparency, and proof of sustainability. Meanwhile, geopolitical tensions and shifting global trade routes create additional uncertainties, raising logistics costs and increasing supply chain risks. The result is clear: rising costs, shrinking margins, and a significantly more complex decision-making environment.
Five structural shifts that stand out
We are entering a phase that is more competitive, more volatile, and increasingly driven by climate policies and carbon pricing. Within this new environment, five structural shifts stand out:
- 1: Scarcity is no longer an exception. It is becoming the norm
- 2: Cross sector competition intensifies
- 3: Residues become a critical bottleneck
- 4: Carbon is changing the rules of the game
- 5: Procurement becomes strategic, no longer just operational
Wood and biomass supply now face structural constraints, driven by tougher sustainability rules, biodiversity targets, and growing climate related impacts on growth cycles and harvesting.
Demand is rising not only among traditional industries but also in emerging sectors such as advanced biofuels, bioenergy with carbon capture and storage (BECCS), district heating, and biochemicals. While some emerging applications, particularly carbon removal solutions such as BECCS, are still largely driven by voluntary carbon markets, their rapid development signals a potential structural shift in biomass demand and will have an impact on the traditional biomass markets.
Shortage begins with lower value materials, such as industrial residues and recycled wood. Once considered secondary streams, these materials are becoming essential inputs for multiple sectors, increasing their economic relevance and intensifying competition for every available fraction of biomass. This transition is future complicated by the cascading principle, which significantly increase market pressure for residues.
Biomass is valued not only for its direct use, but also for the role it plays in the low carbon economy. Sectors benefiting from climate incentives now have a higher willingness to pay, and biomass is increasingly viewed as a carbon asset, influencing pricing, investment decisions, and the redesign of industrial portfolios.
As availability tightens and new competitors enter the market, procurement evolves from a support function into a core strategic priority. Instead of focusing solely on transactional purchasing, companies now prioritize resource control, stable partnerships, l flexible‑term strategic contracts, and active risk management.
Why companies must place biomass at the centre of strategic decisions
The convergence of climate, regulatory, geopolitical, and demand related pressures is creating a turning point in the markets. Companies that continue treating biomass supply as an operational activity faces significant risks: supply disruptions, rising costs, loss of competitiveness, and even potential operational infeasibility in the medium term.
This moment requires elevating biomass to a strategic agenda, directly influencing supply security, cost predictability, regulatory compliance, and competitiveness in carbon driven markets.
Ensuring access to sustainable biomass is not merely operational. It is a critical factor in safeguarding business continuity.
What are the possible pathways to address these challenges?
To address these challenges, companies need to build resilience through a set of strategic actions that respond to both structural market shifts and increasing regulatory demands. The first essential step is to develop a deep understanding of market and supply dynamics. This includes evaluating structural availability, regional differences and shifts, and longterm resource constraints across Europe and global markets. Without this foundation, sourcing decisions and investment planning become increasingly exposed to uncertainty and risk.
Building on this understanding, companies must also redefine their procurement strategies. Traditional purchasing models are no longer sufficient in a context where competition for resources intensifies and availability becomes more constrained. Diversifying suppliers, establishing long-term contracts, and integrating carbon value into strategic decision making are now indispensable measures for ensuring stable and competitive access to biomass. Sourcing needs to get strategic not operative.
In parallel, organizations must prepare for a rapidly evolving regulatory environment. New frameworks such as the EUDR, the EU Taxonomy, forest certification requirements, and CO₂ pricing mechanisms demand more robust systems capable of ensuring full traceability, comprehensive documentation, and consistent transparency. Adapting to these obligations is not only a compliance necessity but also a key factor in maintaining credibility and competitiveness in increasingly sustainability driven markets.
Finally, companies need to strengthen their ability to mitigate geopolitical and trade risks. Political tensions, shifts in tariff regimes, and protectionist policies can abruptly disrupt access to critical resources. This context requires proactive risk assessment, continuous monitoring of global developments, and anticipatory planning to ensure supply chain continuity despite external shocks.
Together, these elements form a comprehensive pathway for building long term resilience in a market undergoing profound transformation.
Let AFRY help you navigate the transition with:
In-depth market intelligence
We provide detailed insights into wood and biomass resources, analyzing availability, the effects of decarbonization policies, cross-sector competition, and price trends to empower your decision-making.
Extensive industry connections
Our global network spans sawmills, pulp and paper producers, utilities, traders, biofuel developers, policymakers, and technology companies, ensuring you have access to the right expertise and partnerships.
Expertise in energy markets and carbon policies
We help you navigate the complexities of the carbon economy, connecting biomass to its value within the broader energy landscape and regulatory frameworks.
With this unique combination, we deliver tailored supply strategies that align with your regulatory requirements, adapt to market shifts, and support your decarbonization objectives.
