Wood Pellets, Policy, and the Atlantic Divide

The United States and Europe share the same wood pellet technology. What they don’t share is a policy framework — and the difference shows up in annual pellet consumption.

According to the Energy Information Administration’s Winter Fuels Outlook, roughly 1.7-1.8 million American households will be heated with either cordwood or wood pellets this winter. These estimates align with the available data from the EIA on wood pellet sales over the last five years, with U.S. total sales ranging between 1.5 and 2.1 million tons. Annual pellet usage is highly variable and depends on whether consumers use their appliances as a supplementary or primary heating source, as well as on the accumulated Heating Degree Days (HDDs) in pellet-burning regions each year. With an average of 2 tons of wood pellets used per household each heating season, around 750,000 to 1,000,000 American homes use wood pellets for some of their heating needs each winter. While pellets are used in less than 1% of homes in the United States, the home-heating wood pellet market creates demand for nearly 4 million tons of residuals (largely hardwood), adding over $150 million in revenue for sawmills and secondary wood-processing sites across the country.

In Europe, policymakers show a greater affinity for renewable heating options and have built policy and subsidy frameworks that have led to far higher deployment of wood pellet heating. According to the 2026 Pellet Statistical Report, over 5% of homes in both Italy and France (8.7% and 6.2%, respectively) use wood pellets for some or all of their space-heating needs. While the populations of those countries are much smaller than that of the United States, each has almost twice as many homes using wood pellets as we do stateside. Pellet usage in Italy fluctuates between 3 and 3.5 million tons each year. While Italy has domestic production, the country meets nearly 85% of its annual demand through imports from countries such as Slovakia, Slovenia, Austria, and Croatia. France falls just short of Italian consumption at 2.5 million tons per year. These higher volumes of wood pellet utilization bring with them higher demand for sawmill residuals and increased revenues for sawmill and wood product manufacturers for their residual streams.

While some of these disparities in pellet utilization can be attributed to differences in natural gas infrastructure in the rural regions of Italy and France, the real drivers are subsidy programs and/or prohibitions on the use of fossil-fuel heating in these countries. In Italy, biomass heating systems have been subsidized generously since 2012. In some instances, up to 65% of the cost of an installed system is covered.

In France, a program called MaPrimeRenov has subsidized the installation of pellet appliances since 2020, with subsidy levels increasing with household income. Similar to the subsidies in Italy, this program in France offered generous grants to homeowners that typically covered more than half of the installed cost of a pellet boiler or stove.

Austria has gone even further and paired subsidies with a phase-out and a prohibition on the installation of fossil-fuel heating sources. Starting in 2020, oil and coal heating systems were banned from new construction, and in 2023, Austria added natural gas to the list of prohibited fuels.

Moreover, the country is looking to phase out existing systems and fully decommission them by 2035. This comes at a cost, of course, and in 2024, the budget for renovation subsidies alone topped €1 billion.

Progressive governments in Europe have shown a far greater willingness to both limit fossil fuel use and incentivize wood pellet heating than the U.S. federal government has. Still, components of this two-pronged approach are beginning to emerge. In New York, the All-Electric Buildings Act sought to limit natural gas use in new construction, paving the way for increased use of heat pumps, but the law met stiff opposition, and its implementation is, for now, paused. On the incentive side of the ledger, a long-sought federal tax credit for the installation of qualifying wood and wood pellet appliances finally found traction in 2020 when a tax credit for 26% of the installed cost of a biomass system was passed. This program was altered in 2022 when it was rolled into the Inflation Reduction Act. The credit percentage was increased to 30% but capped at $2,000, blunting its impact on higher-priced systems like pellet boilers. This credit was eliminated in 2025 with the passage of H.R. 1 (One Big Beautiful Bill Act). For now, no federal grant or tax credit is available to consumers looking to purchase any wood pellet appliance. Moreover, a tax credit stands in stark contrast to an outright grant, and the marketplace impact of these programs when they were in place didn’t lead to the widespread adoption that wood heating advocates had hoped for.

Wood pellet utilization in the United States creates significant demand for residuals from sawmill and secondary wood product manufacturing. Still, policymakers stateside have not shown any appetite to introduce and pass the kinds of subsidies that have led to far higher rates of pellet heating adoption across Europe. The Pellet Fuels Institute continues to advocate for the reintroduction of these tax credits while also ensuring that policies and regulations hostile to wood heating are kept at bay.

By Tim Portz, Executive Director, Pellet Fuels Institute