An Examination of Excess Wood Pellet Supply in the United States

Abstract

The US wood pellet exports—mostly to Europe, Japan, and South Korea—comprised 85 percent of its wood pellet production in the past 20+ years. In this article, we estimate the regional excess supply of wood pellets in the United States using annual data from 1996 to 2021.We use Seemingly Unrelated Regression (SUR) analysis in a profit maximization framework for the South, North, and West regions of the United States. We also include some clean energy policies of the European Union (EU) to examine their potential impact on US wood pellet export volume. Our results show that after application of the low-carbon energy target in the EU, the export volume of the United States has increased, especially in the South region. Elasticity of excess wood pellet supply from the United States was approximately 0.15 in all three regions, and interest rates and energy costs have negative impacts on regional excess supply. Therefore, the recent increase in interest rates and energy costs could slow down the growth of excess supply of wood pellets in the United States.