Are Wood Pellets Worth Billions In Subsidies? Drax Faces A Reckoning

SELBY, ENGLAND – JANUARY 30: The winter sun sets behind the Drax Bio mass Power Station operated by Drax Group PLC on January 30, 2025 in Selby, England. Once one of the largest coal power plants in Europe, the Drax power station in North Yorkshire now generates electricity by burning wood pellets sourced from trees in North America. (Photo by Christopher Furlong/Getty Images)

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The energy industry initially sold wood pellets as a way to clean up coal. And governments bought into that assumption. But now policymakers are questioning that position and even reversing course.

At the center of this debate is a UK-based power company called Drax, which converted Europe’s largest coal plant into a biomass facility—one fueled by wood pellets that it imported from southern states in the United States. The debate raises a multitude of questions, namely those centered on pollution and costs. That is, if the additive creates more pollution than either wind or solar energy, why bother, especially since it comes from a power source that depends on subsidies?

Merry Dickinson, campaign director for the Dogwood Alliance, told me that Drax now operates entirely on woody biomass, requiring seven to eight million tons of wood pellets annually. “The amount of wood required to run at these levels is beyond what is available as waste wood,” Dickinson says. “Even when the industry refers to ‘waste wood,’ much of the supply consists of whole trees.”

Biomass received special treatment under the 2010 European Renewable Energy Directive, which counted emissions from burning wood as zero at the smokestack. The underlying assumption: trees regrow and reabsorb carbon over time. Post-Brexit, the UK expanded subsidies for biomass, positioning wood pellets as a bridge fuel to reduce reliance on coal. Under these rules, a power plant can burn wood and claim carbon neutrality—a calculation not applied to fossil fuels.

Drax’s business model has long relied on government incentives rather than market demand. The UK has historically provided about $1.1 billion annually in subsidies, but these payments are scheduled to be cut nearly in half after 2027. Meanwhile, Drax has shuttered facilities in Arkansas and British Columbia and scaled back investments in bioenergy with carbon capture and storage. Some operations are pivoting toward data centers, a quiet acknowledgment that the market cannot sustain the company at previous levels.

Unlike wind and solar, which generate electricity without combustion emissions, biomass combines emissions from burning wood chips with those from processing, transport, and ongoing fuel extraction. Subsidies for wind and solar have been declining per megawatt-hour as technology costs fall, while biomass continues to benefit from unusually high public support.

Drax did not respond to three requests for comment made over several weeks. In previous statements, the company has said it complies with environmental regulations and that biomass plays a critical role in providing dispatchable renewable power. “As a company dedicated to sustainable energy production, high standards of safety and environmental compliance are always our top priority,” Drax told the Guardian.

Research Challenges Carbon Neutrality

Recent lifecycle analyses, including studies by MIT and Chatham House, suggest the carbon math behind national policies promoting the mixing of wood pellets with coal is deeply flawed. Those studies have found that replacing coal with wood pellets can increase near-term carbon emissions, particularly when whole trees—rather than waste residues—are used.

The process begins with harvesting mature trees, converting them into pellets through energy-intensive drying, shredding, and pressing, and shipping them overseas. Carbon stored in standing trees is released immediately, and regrowth can take decades to offset the emissions. Compounding the problem, wood has lower energy density than coal, meaning more volume must be burned to produce the same amount of electricity.

“It’s better to keep the trees on the land and keep all that carbon out of the atmosphere,” said John Sterman, professor of management at MIT Sloan School of Management, in a 2018 release. “A molecule of CO2 emitted today has the same impact on the climate whether it comes from coal or biomass. Declaring that biofuels are carbon neutral, as the EU, UK, and others have done, erroneously assumes that forest regrowth happens quickly and fully offsets the emissions from biofuel production and combustion.”

In Mississippi, residents have sued Drax over alleged air pollution violations at its Gloster pellet mill—a case that highlights the local costs of an energy source often discussed only in global carbon terms. The plant uses cranes to move whole trees, suggesting a reliance on raw, virgin wood and not waste wood.

Meanwhile, regulators have previously fined the plant for violations involving volatile organic compounds, methanol, and formaldehyde. The plant’s operations highlight that biomass power not only has carbon implications but also presents tangible local air quality risks.

“Forest-derived biomass is the focus,” says Michél Legendre, also with Dogwood Alliance, in an interview. “Drax’s operations require immense amounts of trees, clear-cutting acres every year—not just twigs or leftovers.”

Adding wood pellets to the combustion process was well-intentioned—to clean coal, which was then the leading method of electricity generation. However, since the process’s introduction, many things have changed, including the sharp drop in wind and solar prices and new studies showing that the pellets did not fulfill their promises. As a result, regulators are rightfully reviewing their policies—ones that focus on truly sustainable sources of power.