The effects of the Great Recession of 2007–2009 on the construction industry led to a decline in demand for paper products and increased demand for reduced carbon emissions to minimize global warming effects. As a result, significant changes have taken place in the harvesting and processing of wood products. The demand for lumber for construction has decreased, and the demand for alternative fuels has increased. The result is that the timber industry in the southeastern states and some western states has begun to emphasize the production of a timber by-product, wood pellets. The wood pellets are made from the waste of the sawmill process; that is, the treetops and the knotty or crooked limbs are processed into finger-sized pellets. These wood pellets are increasingly being used to replace coal in power generation plants. This is particularly true in some European countries that have taken stronger steps to produce green energy. The pellets are considered a sustainable source of energy because the trees that produce the pellets are replaced by other trees, and the growth of trees removes carbon emissions from the atmosphere; some environmentalists would argue, therefore, that the use of pellets is carbon-neutral, certainly more so than the use of coal. Coal is one-third the cost of wood pellets, but strict emissions requirements in the European Union (EU) are causing power plants in the EU to shift to wood pellets.

Required

1. Should wood pellets be accounted for as a by-product or a joint product for the timber industry? Explain briefly.

2. Assess the sustainability issue for the production of wood pellets. What are the advantages and disadvantages of the use of wood pellets in power generation as a replacement for coal?

3. Most of the current demand for wood pellets is from EU countries. Would your answers to requirements 1 and 2 differ if the wood pellets were used domestically instead of shipped to the EU for use there?