INVESTOR REPORT | February 2019
The Biomass Blind Spot
This paper highlights the biomass power sector’s impact on  
climate change and its associated financial and reputational risks.  
We provide recommendations to support investors and banks  
engaging with the sector.

2
Author 
 
Jo Alexander
About the author 
 
Report written and produced by Jo Alexander, a Chartered Geologist who spent 11 years 
working as an Exploration Geoscientist for BP. Jo’s experience in the energy sector and 
her master’s degree in Earth Sciences from Oxford University, gives her an in depth 
understanding of climate science and earth systems which she used to engage investors 
about the low-carbon transition. Input and guidance was received from the ShareAction 
research team.
Acknowledgements 
ShareAction gratefully acknowledges the financial support of <JMG Foundation>. 
This foundation kindly supported this project, but the views expressed are those of 
ShareAction. More information is available on request.
We would further like to thank the panel of experts who gave their time to provide 
guidance to inform this research project, including Caroline Haywood (ClientEarth), 
Peter Riggs (Pivot Point), Merel van der Mark (Environmental Paper Network), Peg 
Putt (Environmental Paper Network), Wolfgang Kuhlmann (ARA), Almuth Ernsting 
(Biofuelwatch), Duncan Law (Biofuelwatch), Mary Booth (Partnership for Policy Integrity) 
and Katie House (Climate Bonds Initiative).
Design layout: Colette G. St-Onge
Figure 2 (The Carbon Impact of Forestry) illustration: Rob Cornish, kurokin.uk

3
About ShareAction  
ShareAction is a UK registered charity working globally to lay the tracks for responsible 
investment across the investment system. Its vision is a world where ordinary savers and 
institutional investors work together to ensure our communities and environment are safe 
and sustainable for all. 
In particular, ShareAction encourages institutional investors to be active owners 
and responsible providers of financial capital to investee companies, while engaging  
meaningfully with the individual savers whose money they manage. Since 2005,  
ShareAction has ranked the largest UK asset owners and asset managers on their  
responsible investment performance. 
Contact us about this report
  
Jo Alexander 
Research and Engagement Manager
ShareAction 
jo.alexander@shareaction.org 
+44 (0)20 74037833  
Contents 
1 | Executive Summary
 7 | Background
10 | Challenging Assumptions
15 | The Implications for Investors
17 | Current Biomass Policies
22 | Recommendations for Engagement
24 | Conclusions
25 | Glossary
 
Toby Belsom 
Head of Research
ShareAction 
toby.belsom@shareaction.org 
+44 (0)20 71832358

1
EXECUTIVE SUMMARY
This paper is designed to increase understanding of the complex issue of biomass that is 
derived from wood and used in the energy sector, amongst institutional investors and banks. 
We outline the risks to investors and why the expansion of biomass power infrastructure, and 
the corresponding increased demand for biomass feedstock, is damaging our prospects of 
achieving the goals of the Paris Agreement.1,2 Based on our research we recommend:
•	
Investors and banks should not provide financial support for new biomass power 
infrastructure;
•	
Greater engagement is needed with existing biomass power operators and supply chains 
to adopt and enforce very strict criteria; and
•	
Biomass should not reduce or deflect funding away from solar or wind energy projects.
This topic has received relatively little attention from investors compared to the climate 
issues surrounding the generation of power from coal power stations. However, biomass 
urgently deserves greater attention because the climate impacts can be more significant 
than for coal and financing of new biomass infrastructure would lock in future carbon 
emissions, which must be avoided. 
This paper focuses entirely on the climate impacts of biomass power, the combustion of solid 
biomass derived from wood to generate electricity. However, there are additional impacts on 
forest biodiversity, public health and community rights, which also need to be considered by 
investors. Preserving natural forests, and re-establishing biodiverse forest ecosystems, has a 
wide range of important benefits in addition to building climate resilience.
The key messages of this paper are summarised in the following pages. 
“ 
Biomass urgently deserves greater attention because the 
climate impacts can be more significant than for coal and 
financing of new biomass infrastructure would lock in future 
carbon emissions, which must be avoided.  
”

2
Flawed assumption 
There is a flawed assumption that biomass 
is a carbon neutral fuel and a solution to 
climate change. Therefore carbon emissions 
from burning wood have been ignored by 
utility companies and policy makers for two 
reasons.  Firstly, because it is incorrectly 
seen as a “renewable” resource. The carbon 
emissions from combustion are assumed to 
be recaptured as trees regrow. However, at 
the point of combustion, wood emits more 
CO2 than coal.3,4,5 It takes decades for this 
carbon to be reabsorbed by forest growth. 
Given that we urgently need to reduce 
greenhouse gas (GHG) emissions over the 
short-term to reach a net zero energy system 
by 2050, biomass is not compatible with 
achieving this. The second reason is related 
to international carbon accounting rules. 
UNFCCC’s reporting guidelines require GHG 
emissions related to bioenergy to be counted 
in the land-use sector, where the tree is felled 
rather than at the point of combustion.6  
This is intended to avoid double counting 
of emissions, however, this gives permission 
for the importing country to ignore 
emissions of combustion by assuming they 
have already been accounted for, making 
carbon emissions of biomass power appear 
artificially low. 
Damaging forest carbon stocks
This paper challenges the assumption that 
carbon is recaptured by forest regrowth, at 
the rates required to offset emissions from 
combustion. Converting natural forests into 
a managed or plantation forest reduces their 
stored carbon. In addition, the methods used 
to grow and harvest biomass feedstocks also 
have an enormous impact on how quickly 
forest carbon can recover. The good, the bad 
and the ugly impacts of forest management 
on carbon emissions are illustrated in Figure 
2. For biomass to be a renewable, low-carbon 
fuel, forest regrowth must sequester carbon 
at the same (or greater) rate as carbon 
emitted from combustion.7 Companies 
that supply this wood should adopt forest 
management practices that limit their impact 
on the carbon stocks of forests, and they 
should be challenged when they deplete 
these carbon stocks.
ON PAGE 10:
ON PAGE 11:

3
Industry growth
The situation in the UK is of particular 
concern as biomass power generation has 
grown rapidly, becoming an increasingly 
critical segment of the energy mix. Plant 
biomass now generates 20% of the UK’s 
“renewable” energy.8 The UK is now the 
largest global importer of wood pellets.9 
Demand is projected to rise by 50% over the 
next decade in the UK with an astonishing 
increase of 250% expected globally.10 To 
meet growing demand for feedstocks, the 
manufacture of wood pellets has become 
a truly industrial process , with large 
volumes of international trade. Although 
some utility companies have introduced 
sustainability standards, these are difficult 
to monitor. This growth has been supported 
by subsidies and a blind acceptance that 
biomass is a “renewable” source of energy 
that contributes to CO2 emission reductions 
relative to conventional fossil fuel sources. 
Biomass hinders Paris goals
Increasing numbers of asset managers 
and asset owners have committed to 
carbon reduction targets or to aligning 
their investment policies and practices 
with the Paris Climate Agreement. This is 
particularly the case for CA100+ signatories. 
This large group of institutional investors 
“support the Paris Agreement and the 
need for the world to transition to a lower 
carbon economy consistent with a goal 
of keeping the increase in global average 
temperature to well below 2°C above pre-
industrial levels”. ShareAction’s recent Asset 
Owners Disclosure Project (AODP) surveys 
of insurers and of pension funds highlighted 
that many large asset owners have identified 
increasing renewable investments as a key 
route to meeting the climate challenge.11 
However, it is essential that this does not 
include new biomass energy projects and 
that the carbon intensity of existing projects 
is substantially reduced. In addition, biomass 
should not divert investment from lower 
carbon forms of energy which are scalable 
solutions to climate change such as solar, 
wind, or energy storage.
ON PAGE 8:
ON PAGE 16:

4
Risks to investors 
This paper seeks to support investors in 
understanding and addressing the risks 
of biomass power generation. There is a 
financial risk from the increasing probability 
that subsidy regimes will be altered, as the 
carbon reduction credentials of biomass are 
increasingly questioned by policy-makers 
and their advisors.12 Removal of subsidies 
will impact profitability and asset valuations, 
as was seen when Spain changed their 
renewable subsidies, heavily impacting solar 
power projects.13 There are also reputational 
risks from two sources. At the local level, 
biomass power plants often face opposition 
from local communities.14 On a broader level, 
investors who have committed publicly to 
support the goals of the Paris Agreement 
could find that exposure to biomass 
investments and projects reduces their 
credibility on portfolio decarbonisation and 
in addressing climate-related financial risks. 
Utilities & banks lagging behind
Most equity investors are exposed to 
biomass through their investments in utilities, 
who own and operate biomass power 
stations, and banks, who finance biomass 
projects in the quoted and private sector. We 
have compiled publicly available Energy and 
Forestry policies from the top 15 European 
banks15 and 12 leading European utilities 
firms. Our research findings reveal that many 
utilities and banks have a long way to catch 
up to leaders:
•	
Most banks do not have a statement 
about the impact of biomass on the 
climate. One bank considers biofuels a 
climate solution,16 which we suggest is an 
overly simple and misleading assumption. 
Several banks have a more sophisticated 
approach, acknowledging that biomass 
can only be considered low-carbon when 
extremely strict criteria are met.
•	
Utilities’ and banks’ policies often 
rely on compliance with international 
sustainability standards, such as the 
Forestry Stewardship Council,17 to protect 
and monitor forest carbon stocks in 
supply chains. As our research shows, 
these standards do not give sufficient 
comfort. Either these international 
standards need to be strengthened or 
utilities’ and banks’ policies should better 
differentiate between practices within 
biomass supply chains.
•	
European utilities have a mix of 
approaches to biomass; some are 
withdrawing or reducing exposure, 
whereas others have large and growing 
portfolios of biomass power stations. 
Fortum Oyj is an example of a utility 
with many biomass power stations.18 One 
of which uses peat as a fuel, destroying 
a valuable natural carbon stock that 
regenerates at the incredibly slow rate of 
1 to 2 mm per year.19 They also claim that 
co-firing biomass with coal reduces CO2 
emissions by up to 40%.20 Not only is this 
claim misleading, because it relies on the 
incorrect assumption of carbon neutrality, 
but it is also a cause for serious concern if 
it is used to justify extending the life span 
of existing coal powered infrastructure, 
reversing the progress of investors and 
banks that have introduced robust coal 
policies. 
ON PAGE 15:
ON PAGE 17:

5
Recommendations for engagement 
The recommendations outlined in Tables 1 and 2 are designed to strengthen the biomass 
policies contained in investors’ and banks’ forestry and energy sector policies. If these criteria 
are implemented and enforced, they would rightly limit the supply of biomass and the scale 
of the industry. 
Against each of these recommendations, we have set out a series of questions that asset 
managers, asset owners and banks should be asking forestry and utility companies (see page 
22, “Recommendations for Engagement”). We hope that these will serve as a helpful guide 
for engagement and provide a framework for disclosure and improved industry practices. 
If disclosure is unsatisfactory and plans are not put in place to meet these criteria, within 
a reasonable timeframe, then we would recommend divestment or removal of financial 
backing. 
The recommendations in Table 1 are designed to help the utilities sector reduce the climate 
impacts of biomass supply chains and carbon emissions from biomass operations. Most 
significantly, we recommend including emissions of combustion in full life cycle assessments, 
which goes beyond current UK and EU reporting requirements. We also recommend 
managing the composition of feedstocks to maximise residues and wastes, in line with 
a letter from almost 800 scientists to the European Parliament21 and the opinion of the 
European Environment Agency Scientific Committee.22
Table 1: Recommendations to the utilities sector
Recommendation Biomass power generation sustainability criteria
1. Quantify and 
minimise full life cycle 
GHG emissions
Measure and disclose the GHG intensity (gCO2/MJ or kgCO2/MWh) 
of your operations, including long-term loss of carbon from forests, 
cultivation, processing, transportation and, most significantly, 
combusion emissions.
Maximise energy efficiency.
2. Manage composi-
tion of biomass feed-
stocks
Maximise the proportion of forest, processing or agricultural 
residues, see Recommendation 1 in Table 2 for more detail.
Restrict wood harvested for the purpose of bioenergy to forests 
that are maintaining or increasing carbon stocks over short 
timescales, see Recommendation 2 in Table 2 for more detail.
3. Audit supply chains
Use Recommendations 3, 4, 5 & 6 in Table 2 and the questions in 
Table 6 to select and audit biomass suppliers. Even if only forest 
residues are being used, they should be sourced from forestry 
companies that are limiting their impact on the carbon stocks of 
forests. 
The recommendations in Table 2 are designed to help the forestry sector eliminate the 
most carbon intensive forms of biomass feedstocks (Recommendations 1 and 2) and 
ensure suppliers of biomass are maximising the carbon stocks of the forests they manage 
(Recommendations 3, 4, 5, and 6). 
It is important to acknowledge the sceptisism amongst campaigners about the effectiveness 
of sustainability criteria and a mistrust in the biomass industry’s implementation of them. This 
has developed because of industry claims that feedstocks meet sustainability criteria whilst 
there is evidence of continued unsustainable practices, such as clear-cutting.23

6
Rather than continuing to give a ‘green-light’ to the industry, recommendations in Table 2 are 
intended to demonstrate that only very limited forms of biomass can be considered low-
carbon or sustainable. If these recommendations were properly implemented and audited, 
forestry practices for biomass would have to change dramatically, reducing the supply of 
biomass and therefore the scale of the industry.
Table 2: Recommendations to the forestry sector
Recommendation 
Forestry sustainability criteria
1. Biomass feedstocks, in the 
form of residues and waste, 
should be carefully sourced
Restrict the sourcing of forest residues (composed of tree 
tops and limbs) to those forests where the above- and 
below-ground carbon is being maintained or increased and 
meet the exclusion criteria in Recomendations 3, 4, 5 & 6 
below.
Ensure that the demand for residues and waste does not 
artificially increase its production; it should first be reduced, 
reused or recycled, rather than combusted, where possible.  
2. Harvested biomass feed-
stocks should be carefully 
sourced
Restrict wood harvested for the purpose of bioenergy to 
forests that can demonstrate increasing above- and below-
ground carbon stocks, as shown in 'The Good' model in 
Figure 2. 
•	
afforested land that is not suitable for other purposes 
(which therefore does not compete with food production 
or use by local communities).
•	
existing managed or plantation forests that are 
maintaining or increasing above- and below-ground 
carbon stocks and harvests never exceed the forest’s the 
sustainable yield capacity.
Exclude harvesting of slow growing tree species (≤2 m3/ha/
yr), particularly hard woods such as oak.  
3. Suppliers should maximise 
carbon stocks of managed 
forests 
Exclude harvesting from natural forests. This includes 
wetlands and peatlands; the carbon stocks of these 
vulnerable ecosystems are high and should be protected.
Exclude conversion of natural ecosystems (forests, 
grasslands or wetlands) into managed or plantation forests.
4. Suppliers should exclude 
clear-cutting
Exclude clear-cutting in any type of forest (natural, managed 
or plantation).
5. Suppliers should take a 
cautious approach to thin-
ning
Exclude large whole tree stems sourced from thinning, 
except for trees that are diseased and their removal will 
benefit the rest of the forest. 
Restrict thinnings to small or early thinnings that are 
removed for he purpose of improving the quality of growing 
stock, whilst minimising disturbance of litter and soil carbon.
6. Suppliers should maximise 
the proportion of harvests 
used in long-lived products
Maximise wood used in long lived material wood products, 
such as those used in construction and minimise the volume 
of forest residues used for bioenergy.
Exclude dedicated harvests used for bioenergy.
Exclude additional harvesting of wood to meet demand for 
bioenergy that would not have otherwise been harvested.

7
BACKGROUND
This section describes the rapid recent growth of biomass power generation and its 
prospects for further growth, highlighting the leading positions of the EU and the UK, and the 
role that public policy has played in promoting this growth.
The scope, assumptions, and debate 
The term “biomass” in the context of the 
energy industry covers a number of potential 
fuel sources. The scope of this document is 
to review a specific type of bioenergy: the 
combustion or gasification of solid biomass 
derived from wood, often referred to as 
“woody biomass,” to generate electricity and 
heat. The wood feedstock to these processes 
may either be virgin wood, residues from 
forestry activities or processing residues.
Burning biomass derived from forests or 
forest products to generate electricity and 
heat is seen by its supporters as a credible 
alternative to fossil fuels in the effort to avert 
climate change and the UK and EU have 
supported it with renewable subsidies.24, 25, 
26 Drax, the single largest user of biomass 
for power in the world, describes itself as 
“playing a vital role in helping change the 
way energy is generated, supplied and used 
as the UK moves to a low-carbon future.”27 
However, the environmental benefits of 
biomass have been widely questioned by 
think tanks such as Chatham House,3 as well 
as civil society groups and activists.28,29,30 
With such divided opinion, it can be difficult 
for investors to know if woody biomass is 
part of the solution to decarbonise the power 
sector and the broader energy system or is 
exacerbating the problem. 
In reality, the climate impact of burning 
biomass is most often negative, and the 
degree of impact depends on the quantity 
and type of biomass feedstock combusted 
and the rate that this carbon can be 
sequestered through forest regrowth. 
Burning large volumes of biomass for power 
generation combined with unsustainable 
forest management is associated with 
very high net CO2 emissions (see p11 and 
Figure 2). This assessment is supported by 
a recent report by the UK’s Climate Change 
Committee, which warns that without 
improved governance, ‘there are risks that 
biomass production and use could in some 
circumstances be worse for the climate than 
using fossil fuels.’12 
120 organisations, including foundations, civil 
society and non-governmental organisations, 
have supported a position statement saying 
that they do not see a place for biomass 
in large-scale energy production at all: ‘We 
believe that we must move beyond burning 
forest biomass to effectively address 
climate change. We call on governments, 
financiers, companies and civil society to 
avoid expansion of the forest biomass based 
energy industry and move away from its use.  
Subsidies for forest biomass energy must 
be eliminated. Protecting and restoring the 
world’s forests is a climate change solution, 
burning them is not.’30

8
Rapid growth
Global biomass power generation has more 
than doubled, from around 220 TWh in 2005 
to 555 TWh in 2017.31 Europe in particular 
has seen rapid growth, making up one third 
of the world’s biomass-fired electricity 
generation. In 2017, 29.4% of the UK’s 
electricity generation was from renewablei,ii  
sources with 20% of this generated from the 
combustion of plant biomass (see below for 
definitions).8 
Public policies have been the driving force 
behind the growth of the industry by 
incentivizing biomass power. The main phase 
of growth in biomass power in the EU and 
the UK’s was between 2012 and 2015 linked 
to member state and EU policies such as the 
EU’s Renewable Energy Directive (2009),24 
the UK Government’s Climate Change Act 
(2008)32 and Bioenergy Strategy (2012).33 
This resulted in new subsidy support for 
dedicated biomass power stations and coal 
to biomass conversions. In the UK this was 
initially provided through the Renewable 
Obligation Order,24 which has now been 
replaced by Contracts for Difference.25 
As the UK’s biomass power generation has 
grown and demand for biomass has risen, 
feedstocks have become more carbon 
intensive. In 2007 over half of the UK’s 
“renewable” energy was generated from 
wasteiii but by 2016 the sector became 
dominated by virgin biomass,iv largely in 
the form of imported wood pellets.33, 34, 35, 36 
The UK is now the largest importer of wood 
pellets in the world, accounting for 40% of 
the global total (almost 7 million tonnes in 
2017).9 In fact, only 4 countries make up 70% 
of global imports. In addition to the UK, 12% 
of wood pellets are imported to Denmark, 11% 
to Italy and 6% to Belgium; highlighting that 
this is an issue for the EU as well as the UK.
Analysis by the Environmental Paper 
Network predicts a 250% increase in the 
international trade of industrial wood 
pellets over the coming decade.10 The UK is 
expected to maintain its leading position; 
substantial growth in biomass power 
capacity is expected if both Lynmouth Power 
Station and Tees Renewable Energy Plant 
become operational.38 In 2027, the volume 
of pellets imported to the UK will be closely 
followed by South Korea and Japan. These 
rapidly expanding markets will pose a new 
threat to forests in Russia and South East 
Asia.
Figure 1: A Global Threat Map of Biomass Energy Development (on page 9)
Research by the Environmental Paper Network shows that demand for industrial wood 
pellets exceeded 14 million tonnes in 2017. In the next decade, it is expected to more than 
double to over 36 million tonnes.10
i | Renewable sources of energy include onshore and offshore wind, shoreline wave and tidal, solar 
photovoltaics, hydro, landfill gas, sewage sludge digestion, energy from waste, co-firing with fossil fuels, 
animal biomass, anaerobic digestion and plant biomass, according to “Energy Trends” published by the UK 
government Department for Business, Energy and Industrial Strategy and National Statistics.8 
ii | IPCC definition of renewable energy: any form of energy from solar, geophysical or biological sources that 
is replenished by natural processes at a rate that equals or exceeds its rate of use.81 
iii | Waste includes waste wood, animal biomass and anaerobic digestion, sewage gas, landfill gas, and 
waste.36
iv | Virgin biomass includes wood used for heating and plant biomass (includes wood pellets and energy 
crops).36

9
Demand and Supply of Industrial Wood Pellets in 2017
Canada
2.2
USA
5.0
UK
6.8
Portugal
0.5
Belgium
1.0
Netherlands
0.3
Denmark
2.3
Rest of the EU
0.9
Latvia
1.4
Estonia
0.9
Russia
0.9
Other Europe
0.5
Vietnam
1.6
Malaysia
0.4
South Korea
2.4
Japan
0.5
Wood pellet demand (in million tonnes)
Wood pellet supply (in million tonnes)
Demand and Supply of Industrial Wood Pellets in 2027
Wood pellet demand (in million tonnes)
Wood pellet supply (in million tonnes)
USA
9.0
Canada
4.0
Brazil
2.0
Portugal
1.0
Mozambique
1.0
Vietnam
3.0
Malaysia
2.0
Russia
5.0
Australia
3.0
Indonesia
2.0
Other Europe
2.0
Estonia
1.0
Latvia
2.0
UK
10.5
Denmark
3.3
Netherlands
3.0
Japan
9.0
South Korea
8.2
Belgium
1.2
Poland
1.5

10
CHALLENGING ASSUMPTIONS
This section explains the flawed carbon accounting behind the assumption that biomass is a 
carbon neutral energy source. It also demonstrates the importance of properly quantifying 
life cycle assessments of carbon emissions from biomass feedstocks.
Flawed carbon accounting
Drax states that the company ‘saved around 
86% of CO2 emissions compared to the coal 
benchmark’39 in 2016-17. We understand this 
calculation ignores emissions from biomass 
combustion and long-term loss of forest 
carbon stocks. Such claims about the carbon 
neutrality of biomass as a fuel and the 
resulting reduction in emissions compared to 
fossil fuels are therefore very misleading. This 
has emerged for the following two reasons. 
The first is based on the fact that biomass 
can be regenerated leading to an assumption 
that the CO2 released during combustion can 
be recaptured as trees and forests regrow. 
However, this oversimplifies a complex 
issue and does not take into account the 
time dimension. At the point of combustion 
wood emits more CO2 than coal, although 
the quantity varies substantially. Data 
from Drax’s 2017 annual report shows that 
emissions rates for wood pellets are 3% 
higher than coal.5 According to IPCC data, 
wood emits 17% more CO2 than bituminous 
coal, the most common type of coal used in 
electricity generation in the US, and twice 
the emission of natural gas.4 The net carbon 
emissions then decrease over time as the 
carbon stock of the forest regrows, however 
this takes decades and not all carbon can 
be permanently recaptured if the forest is 
repeatedly harvested (as shown in Figure 2). 
The second reason given for carbon 
neutrality relates to flaws in international 
carbon accounting, explained by Searchinger, 
T. D. et al, (October 2009).40 UNFCCC’s 
reporting guidelines require GHG emissions 
related to bioenergy to be counted in the 
land-use sector, in the location where the 
tree is felled rather than at the point of 
combustion.6 This is intended to avoid 
double counting of emissions. In practice it 
gives permission for the importing country 
to ignore emissions of combustion by 
assuming they have already been accounted 
for, whether they have or not. As a result, 
carbon emissions of biomass power appear 
artificially low. This allows imported biomass 
to contribute to that country’s GHG emission 
reduction and renewable energy targets, 
such as those set out by the EU’s Renewable 
Energy Directive.24
This flawed assumption has led to 
underestimates of the full life cycle emissions 
related to biomass power generation, not 
only by Drax but also by the EU Renewable 
Energy Directive’s methodology,41 which 
omits the emissions from biomass 
combustion. Stephenson, A. L. and MacKay, 
D. J. C., (July 2014) developed an improved 
and comprehensive ‘Biomass Emissions and 
Counterfactual’ model of GHG emissions 
from biomass that fully accounts for the 
changes in the carbon stock of forests, 
emissions related to cultivation, processing, 
transportation and emissions from biomass 
combustion for electricity generation.7 
By accounting for all carbon emissions, 
Stephenson and MacKay demonstrate that, 
at the worst extreme, the GHG intensity of 
biomass sourced from natural timberland can 
be as much as 4 times that of coal over a 40-
year period (4000 kgCO2/MWh).

11
Quantifying forest carbon
Carbon emissions resulting from the 
reduction of carbon stored in forests are 
substantial and are therefore particularly 
important to quantify. Evaluating the impact 
of commercial forestry on forest carbon 
stocks requires assessments of both the 
above- and below-ground carbon over 
time, as illustrated in Figure 2 (The Carbon 
Impact of Forestry: The Good, The Bad & The 
Ugly). For biomass to be considered a low-
carbon, renewable resource, carbon must be 
sequestered by forest regrowth at the same 
(or greater) rate as carbon is emitted from 
biomass combustion.  Therefore, in order to 
offset emissions, the average carbon stocks 
of forests from which biomass is sourced 
need to be maintained or increase over short 
timescales, as shown in ‘The Good’ model.  
This can be achieved by restricting harvests 
to small volumes of wood and allowing the 
forest to recover before the next harvest.  
Carbon emissions can also be reduced by 
minimising the proportion of the harvest 
used for bioenergy and maximising the 
proportion used in long lived wood products.
In contrast ‘The Bad’ and ‘The Ugly’ models 
show the damage to average carbon stocks 
when natural forests are converted to 
managed forests and harvested for biomass. 
These models challenge the idea that carbon 
can be permanently recaptured if forests 
are repeatedly harvested by clear-cutting. 
Biomass should not be sourced from forests 
managed in this way.  
‘The Bad’ model shows the minimum impact 
of clear-cutting; the forest carbon is given 
time to fully recover and there is no impact 
on soil carbon. In this scenario, the long-term 
average carbon stored in the managed forest 
is 100 tonnes of carbon per hectare (tC/ha) 
less than the natural forest that it replaced. 
The exact quantity of carbon loss will vary 
depending on the volume of wood harvested, 
the rate of regrowth and frequency of clear-
cutting. 
‘The Ugly’ model shows how damaging 
clear cutting can be; harvesting at a higher 
frequency doesn’t allow forest carbon to 
recover and soil carbon is depleted through 
removal of all forest residues. In this scenario, 
the long-term average carbon stored in the 
managed forest is 250 tC/ha less than the 
natural forest it replaced. However the loss 
of forest carbon increases to 370 tC/ha if we 
assume that the natural forest would have 
continued to sequester carbon at a modest 
rate of 1 tC/ha each year.
These models form the basis of our 
recommendations to the forestry sector in 
Table 2.

12
Baseline estimates of natural forests’ and 
soils’ carbon stocks 
•	
Above-ground carbon stocks of most 
natural forests may range between 
100 and 500 tC/ha,41 with tropical, 
sub-tropical and boreal forests being 
particularly rich in carbon. Conventional 
wisdom has been that mature forests 
reach equilibrium, balancing carbon 
absorbed and emitted (as illustrated 
by the net carbon emissions coloured 
in yellow in ‘The Bad’ model). However, 
Luysseart et al. (2008) demonstrate that 
ancient forests can continue to absorb 
carbon at a rate of about 2 to 5 tC/
ha each year (as illustrated by the net 
carbon emissions coloured in yellow in 
‘The Ugly’ model).43  
•	
Below-ground carbon: Although 
estimates of soil carbon stocks are much 
more limited, it is clear that some soils 
are much richer in carbon than others.  
For example, the soils in the woodlands 
of Scotland are particularly carbon rich 
(580 tC/ha), more the double those in 
England, because they grow on carbon 
rich moorland.44
Impact of commercial forest management 
practices on carbon stocks
•	
Above-ground carbon: As the intensity of 
forest management increases, the above-
ground carbon stocks decrease.45, 46 This 
may be the result of replacing low impact 
thinning with clear cutting, increased 
frequency of harvests or modifying 
the mix of tree species to favour faster 
growing soft wood. 
•	
Below-ground carbon:  Land-use 
conversion, for example from woodland 
to arable land or pasture, has a 
detrimental impact on below-soil carbon. 
There is widespread research to show 
that removing forest residues will also 
reduce soil carbon.3, 12 
Figure 2: The Carbon Impact of Forestry: The Good, The Bad and The Ugly (page 13)
Three models that show the impact of forestry on above- and below-ground carbon stocks.
Academic and industry research was drawn on to quantify the forest carbon shown in Figure 
2; these can be broadly grouped into baseline estimates of forests’ carbon stocks and how 
these are impacted by commercial forestry:

13
Forest carbon stock (tC/ha)
Time in years 
100
75
50
25
100
0
100
200
300
400
Natural Forest
Clear-cut every 25 years, residues removed 
Clear cut every 12 years, 
residues removed 
Forest carbon stock (tC/ha)
Time in years 
100
75
50
25
100
0
100
200
300
400
Natural Forest
Clear-cut every 25 years, residues returned to forest 
Forest carbon stock (tC/ha)
Time in years 
100
75
50
25
100
0
100
200
300
400
Abandoned land 
Thinning every 12 years 
THE GOOD
Afforestation 
scenario
A
v
e
r
a
g
e
 
C
a
r
b
o
n
 
S
t
o
c
k
s
+240
tC/ha
THE BAD
Clear cutting 
scenario
THE UGLY
Frequent
clear cutting
scenario
A
v
e
r
a
g
e
 
C
a
r
b
o
n
 
S
t
o
c
k
s
-100
tC/ha
A
v
e
r
a
g
e
 
C
a
r
b
o
n
 
S
t
o
c
k
s
-370
tC/ha
net carbon emission
below ground carbon
average carbon stock of managed forest
harvest
above ground carbon

14
Carbon intensity of feedstock is uncertain 
Currently, we do not have the level of 
disclosure that is necessary to assess the 
carbon intensity of biomass feedstocks. To 
do this properly we require comprehensive 
life cycle assessments which include 
emissions from combustion7 and to 
understand the proportion of commercial 
forestry that falls into each of the three 
models illustrated in Figure 2 by quantifying 
of the above- and below-ground carbon 
stocks. However undertaking these 
assessments is currently a challenge in 
practice because utilities and forestry 
companies do not have the necessary 
technical expertise. We strongly suggest 
investors demand this type of quantitative 
information and require due diligence to be 
undertaken, stronger governance processes 
and verification from independent auditors.
In the absence of such quantitative 
assessments we recommend that feedstocks 
be composed of the following:
•	
Processing residues from sawmills 
and paper mills, as well as agricultural 
residues, especially those that would 
have otherwise been incinerated or 
decomposed in landfill.
•	
Forest residues sourced only from 
companies that minimise their impact on 
the long-term carbon stocks of forests 
under their management (see Table 2, 
Recommendations 1, 3, 4, 5 & 6). 
•	
Harvested wood used for biomass 
power generation should be minimised 
and sourced only from forests whose 
carbon stocks are increasing (see Table 2, 
Recommendation 2).
The increasing scale and globalisation of 
the biomass supply chain has inevitably 
made it difficult for operators to adhere to 
sustainability criteria outlined at the planning 
and approval stage. This is particularly true 
where operators lack control or visibility 
through their supply chain or where they 
acquire feedstock through traders whose 
sources are difficult to verify. Operators in 
the UK are required to provide an audited 
sustainability report to the regulator, Ofgem, 
aligned with the Renewables Obligation 
sustainability criteria,24 however there is 
little guidance about the metrics that they 
should be reporting on. We suggest that the 
recommendations, in Tables 1 and 2 at the 
beginning of this report, provide a framework 
for a comparable set of metrics and targets. 
“ 
Currently, we do not have the level of disclosure that 
is necessary to assess the carbon intensity of biomass 
feedstocks. 
”

15
THE IMPLICATION FOR INVESTORS
This section discusses the risks of investing in biomass. It also highlights the problem that 
biomass poses in aligning investment portfolios with the goals of the Paris Agreement.
Most well diversified asset owners or asset 
managers have exposure to biomass power 
plant operators through their holdings in 
utility companies and banks. An increasing 
number of dedicated “renewable” funds may 
also have exposure to biomass in the private 
or public markets. Here we explore the risks 
associated with the sector.
Financial risk
In the UK, legislation and public policies 
have created a business model for biomass 
power generation. The 2017 Drax Annual 
report and accounts5 outlined the material 
level of subsidy received: £481 million 
from Renewable Obligation Certificates 
(ROCs)25 and £248 million from Contracts 
for Difference (CfD).26 This was a substantial 
increase in total subsidies compared to the 
previous calendar year, when Drax received 
£536 million from ROCs and £10 million from 
CfD. 
As the green credentials of biomass power 
are increasingly being questioned, UK 
government policy is changing to make 
qualification for subsidies more challenging. 
Biomass power plants commissioned 
between April 2021 and March 2026 will 
need to limit ‘lifecycle’ CO2 emissions to 
29 kg CO2 /MWh, an 85.5% reduction 
compared to the previous requirement.47 
There is growing likelihood that subsidies 
will be removed entirely.  In November 2018, 
the UK’s Committee on Climate Change 
recommended that the UK Government 
‘do not provide further policy support 
(beyond current commitments) to large-
scale biomass power plants that are not 
deployed with CCS technology.’12 These are 
strong signals that subsidy support is likely 
to be removed, thereby increasing financing 
costs and lowering returns. This will impact 
the competitiveness of biomass power 
generation projects, particularly now that 
solar and wind power have reached grid 
parity in many countries.48 
“ 
The UK’s Committee on Climate Change recommended that 
the UK Government ‘do not provide further policy support 
[...] to large-scale biomass power plants that are not deployed 
with CCS technology. 
”

16
Reputational risk
Reputational risks come from two sources. 
At the local level, parties providing finance 
to or investing in biomass power projects are 
likely to become embroiled in local disputes. 
For example, Grangemouth biomass power 
station was opposed by local councils due 
to a variety of concerns over air quality, 
sustainability, visual amenity, fisheries and 
water pollution.14
On a broader level, investors who have 
committed publicly to support the goals 
of the Paris Agreement can expect to find 
that exposure to biomass projects reduces 
their credibility on portfolio decarbonisation 
and in addressing climate-related risks. 
Increasing numbers of institutional 
investors have committed to support the 
objectives of the Paris Climate Agreement. 
ShareAction’s recent AODP surveys11 on the 
global insurance and pension fund sectors 
highlighted that a growing number of these 
investors are increasing asset allocation 
to renewable energy projects as a means 
to address climate-related financial risks. 
However, this research finds that large-scale 
biomass power generation should not be 
included in these investments, nor should it 
divert investment from lower carbon forms 
of energy such as solar and wind, or energy 
storage. 
Some utility companies such as Fortum 
Oyj have added biomass to the fuel mix of 
their power plants; they claim that co-firing 
biomass with coal reduces CO2 emissions 
by up to 40%.20 This claim is misleading 
because it relies on an incorrect assumption 
and a cause for serious concern if it is used 
to justify extending the life span of existing 
coal powered infrastructure, reversing the 
progress of investors’ and banks’ that have 
introduced robust coal policies. 
Even green bonds require careful due 
diligence to ensure they genuinely meet their 
own stated objectives regarding meeting 
the Paris goals and GHG emission reduction 
objectives (see page 20).49, 50   
Our assessment of investor policies on 
biomass indicate that many investors are not 
yet fully aware of nor managing the financial 
and reputational risks posed by biomass 
projects.

17
CURRENT POLICIES: BANKS, INVESTORS, 
UTILITIES, & INTERNATIONAL STANDARDS
This section summarises and compares references to biomass contained in the publicly 
available energy and forestry policies, of the top 15 European banks and the largest investors. 
We review the approach of organisations setting relevant international sustainability 
standards and the importance of biomass in the portfolios of the 12 largest European utility 
companies.
Our analysis of biomass relevant policies show that most do not go far enough in 
limiting combustion emissions and protecting the carbon stocks of forests. We make 
recommendations to strengthen these policies in Tables 1 and 2, at the beginning of this 
report.
European banks’ biomass and energy policies
Nine out of the fifteen European banks15 we reviewed make no explicit mention of biomass 
in their publicly available energy policies. Of the six banks that do refer to bioenergy, only 
one views biofuels as a climate change solution16 whilst the other five take a more nuanced 
approach by classifying biomass as restricted activity. 
Table 3: European Banks’ Biomass and Energy Policies17, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62
European  
Bank
Biomass and 
Energy Policies
ShareAction  
comment
Lloyds Banking Group, 
RBS, Santander, Societe 
Generale, Barclays
Biomass is considered 
a restricted activity; 
sustainability is 
assessed against the 
bank's criteria
We believe this to be a sensible 
position to take, as long as 
the criteria used to assess 
sustainability of feedstocks are 
comprehensive, as outlined in 
our recommendations detailed 
in Tables 1 and 2.
UBS, Deutsche Bank, 
Credit Suisse Group, 
Credit Agricole, 
Standard Chartered, 
ING, HSBC Holdings, 
BNP Paribas, UniCredit
Biomass is not 
mentioned in the banks' 
energy or power sector 
policy
We suggest that biomass be 
added to the banks' energy 
or power sector policy as 
a restricted activity, with 
sustainability assessed 
against comprehensive 
criteria, as outlined in our 
recommendations detailed in 
Tables 1 and 2.
BBVA
Biofuels are considered 
a solution to climate 
change'
We believe that this position 
is problematic because it over 
simplifies a complex issue; 
instead biomass, as a type of 
biofuel, can only be low-carbon 
if strict sustainability criteria 
are met. 
+
X

18
All of the 15 European banks that we reviewed had public information available on their 
forestry policies. Table 4 provides an overview of these policy approaches:  
Table 4: European Banks’ Forestry Policies 
Approach / 
exclusions
Number 
of banks
Describe the link between 
forest carbon stocks and 
climate change impact
5
Biomass is a restricted 
activity, only supported if 
sustainability criteria are 
met
5
Policies that cover ‘high-
risk’ sectors, including 
Energy and Forestry, are 
applied to all investments 
rather than just ‘green’ 
investments/products 
8
Expect compliance with 
international sustainability 
criteria (FSC and PEFC) 
7
Endorse the BEI Soft 
Commodities Compact, 
which requires zero 
deforestation by 2020
6
Exclude illegal logging 
7
Exclude biomass sourced 
from environments that 
should be protected as 
rich above ground carbon 
stocks: primary forest and 
HCV forest
8
Exclude biomass sourced 
from environments that 
should be protected as 
rich above below ground 
carbon stocks: peatland
2
Exclude forestry that 
depletes soil carbon 
2
UBS
RBS
Deutsche Bank
Credit Suisse Group
BBVA
Credit Agricole
Santander
Standard Chartered
Societe Generale
ING
Barclays
Lloyds Banking Group
HSBC Holdings
BNP Paribas
UniCredit 
ALL BIOMASS
 RELEVANT POLICIES
(across Energy and Forestry)
FORESTRY POLICIES
Number 
of banks
All of the 15 European banks that we reviewed had public information available on their 
forestry policies. All information on banks in this section was sourced in November and 
December 2018. Table 4 provides an overview of these policy approaches:

19
We recommend that commercial banks 
adopt all policies shown in Table 4 as a 
minimum and that their biomass policies 
refer to, and are consistent with, their 
forestry policy. UBS and RBS have the 
most comprehensive list of exclusions and 
highlighted areas of concern.63, 64 We find 
that:
•	
Most banks (11 out of 15) expect 
compliance with international forestry 
standards, most commonly through the 
Forest Stewardship Council (FSC)17 or 
the Programme for the Endorsement of 
Forest Certification (PEFC).65 Neither FSC 
nor PEFC is robust enough to protect 
the carbon stocks of forests (see page 
20) and therefore should not be used in 
isolation.
•	
Policies often include a geographic 
restriction that limits their application.  
These restrictions should be removed.
•	
Only four banks have policies which 
protect below-ground carbon, such as 
soils and peatlands. This is a particular 
weakness in a range of banks’ policies. 
Investors’ biomass policies
We also reviewed 10 of the largest European 
and 10 of the largest US asset managers’ 
public documents in November 2018. We 
found it extremely difficult to identify any 
policies regarding biomass. Although many 
stated a position on climate change, only two 
- AXA Investment Management and Insight 
Investment - specifically mention biomass: 
•	
AXA Investment Managers has eligibility 
criteria for a range of green investments. 
Biomass and biogas power are only 
eligible for investment if net emission 
reductions can be demonstrated with no 
deforestation.66
•	
Insight Investment raises concerns about 
biomass. ‘While offshore wind projects 
have a beneficial impact on carbon 
reduction… conversion of central power 
stations to biomass is more questionable. 
Burning wood pellets releases a material 
amount of CO2 and could accelerate 
deforestation if the technology is 
adopted on a large scale.’67
We commend these two asset managers for 
their policies on biomass.

20
International Sustainability Standards
Ideally, international sustainability standards 
would require the quantification of the 
both emissions from biomass combustion, 
for inclusion in life cycle assessment, and 
its impact on the carbon stocks of forests. 
However, this is not currently industry 
practice and therefore it is seen as difficult 
to introduce. Without requiring the industry 
to substantially improve carbon accounting 
practices, international sustainability 
standards do not currently go far enough 
in limiting the climate impacts of biomass 
power generation. The Climate Bonds 
Initiative bioenergy criteria48 are currently 
being reviewed following public consultation 
which asked for them to be strengthened 
with regards to limiting the climate impact of 
biomass.
Banks policies and the Climate Bonds 
Initiative forestry criteria50 refer to, and rely 
heavily on the FSC17 or the PEFC65 standards.  
These forestry criteria alone are not enough 
to protect the carbon stocks of forests 
harvested for biomass and require additional 
bioenergy criteria to strengthen them. We 
reviewed the FSC’s 10 Principles and Criteria 
for Forest Stewardship and identified only 
five statements that protect forest carbon 
stocks. Again, we found that they are not 
quantitative, which is a major concern: 
•	
Principle 5.2: The Organisation shall 
harvest at or below a level which can be 
permanently sustained.
•	
Principle 6: The Organisation shall 
maintain, conserve and/or restore 
ecosystem services (which includes the 
sequestration and storage of carbon).
•	
Principle 6.9: The Organisation shall not 
convert natural forest into plantations.
•	
Principle 9.1: The Organisation shall 
assess and record the presence of 
High Conservation Value (HCV) forest, 
including those that control erosion of 
vulnerable soils and slopes.
•	
Principle 10.1: The Organisation shall 
regenerate vegetation cover in a timely 
fashion.
As well as these criteria being weak, 
compliance with these standards is 
frequently limited. In 2015, only 12% of the 
wood that Enviva, the world’s largest wood 
pellet producer, received was certified at the 
forest management level through standards 
such as the FSC, Sustainable Forestry 
Initiative (SFI) or the American Tree Farm 
System (ATFS).68

21
Utilities’ biomass portfolios
We reviewed the public information available of the 10 largest European utility companies 
with the objective of understanding the importance of biomass in their portfolios. All 
information on utilities in this section was sourced in November 2018. This revealed a range 
of strategic approaches.
Utility companies that have significant exposure to biomass include Fortum Oyj, Engie, EDF 
and Drax.
•	
Fortum Oyj operates 23 Combined Heat and Power (CHP) plants, 12 of which co-fire 
biomass and coal. Fortum Oyj states that this reduces the CO2 emissions of its power 
plans by 40% based on the assumption that biomass is a carbon neutral fuel.20 The 
company is increasing its biomass power generation by redeveloping a further two plants 
to use biomass. One of their power stations burns peat as a fuel. Peat is a valuable natural 
carbon stock that takes around 100 years to reform.19 
•	
Engie operates over 50 biomass facilities across Europe, the USA and Brazil, using more 
than 2 million metric tons of organic material every year to generate energy.69 
•	
EDF operates 500MW of biomass worldwide and their subsidiary Dalkia is France’s 
leading operator of wood fired power plants.70
•	
Drax operates the largest biomass fired power station in the UK with a capacity of 
1935MW from its biomass generating units.71 Drax consumed 6.8 million tonnes of wood 
pellets in 2017 mainly sourced from the US and Canada. According to Drax, its feedstock 
in 2017 was composed of 40% sawmill residues, 24% low-grade roundwood, 18% 
thinnings, and 17% forest residues.5 Drax has announced that it will pilot the first European 
bioenergy carbon capture and storage (BECCS) project. The company claims this 
development would make its power station carbon negative, however this is a misleading 
claim as Drax continue to treat biomass as a carbon neutral fuel.
The degree of negative climate impact of biomass power generation is difficult to assess 
without a detailed understanding of sources of biomass used in these power plants and full 
life cycle GHG emissions calculations. However, co-firing biomass with coal is certain to have 
amongst the worst climate impact as it extends the life of coal-fired power stations.
Utility companies that have reduced exposure to biomass include RWE, Enel and Iberdrola.
•	
RWE no longer sees biomass as a core technology, and it is not listed as part of future 
innovations citing that the ‘main challenges are access to feedstock which accounts 
for 25-40% of production costs’ and that ‘feedstock sustainability criteria become 
increasingly important.’72 
•	
Enel took a strategic decision to sell its entire portfolio of Italian biomass plants during 
2018 (108MW installed capacity across 5 assets).73 
•	
Iberdrola has sold all biomass assets from its UK operations (2018). Iberdrola’s remaining 
UK assets generate electricity entirely from wind.74

22
RECOMMENDATIONS FOR ENGAGEMENT
This section proposes questions for investors and banks to ask the utilities and forestry 
sectors against the criteria in Tables 1 and 2. Disclosure against these criteria should inform 
engagement strategies and divestment decisions.
The emerging biomass energy sector 
should have a far greater level of focus 
and engagement among investors, due to 
its impact on and contribution to climate 
change. The Ceres database of shareholder 
resolutions reveals that there were 33 
resolutions related to deforestation and 
rainforest impacts (from 2009 to 2018),75 
however, none of these resolutions mention 
biomass harvested for energy.
We hope that our recommendations and 
associated questions, listed in Tables 5 and 
6 below, will support investors and banks 
in their engagement with the forestry 
and utilities sectors, regarding eliminating 
carbon intensive and environmentally 
damaging biomass from their portfolios 
and reducing associated risks. Many require 
a quantitative answer and are designed to 
establish comparable metrics. We suggest 
investors and banks ask theses questions, to 
forestry and utility companies. Investors, as 
shareholders in banks, should also make sure 
that banks ask their clients these questions. 
If disclosure is unsatisfactory and plans are 
not put in place to meet these criteria within 
a reasonable timeframe, then we would 
recommend escalation strategies including 
divestment.
Table 5: Engagement questions for the utilities sector
These questions are related to the recommendation in Table 1.
Recommendation 
Questions for the utilities sector
1. Quantify and minimise full 
life cycle GHG emissions
What are the GHG emissions (gCO2/MJ or kgCO2/MWh) 
related to each part of your operation: 
•	
long-term loss of carbon from forests?
•	
cultivation and harvesting?
•	
processing (drying, pelleting or chipping)?
•	
transportation (by ship, rail and truck)?
•	
stack emissions at the point of combusion?
What is the energy efficiency of each of your biomass power 
stations? How do you plan to improve this?
2. Manage composition of 
biomass feedstocks
What proportion of your feedstocks are: 
•	
sourced from forest, processing or agricultural residues?
•	
harvested for the purpose of bioenergy? Can you trace 
the supplied wood to the forest? Are the carbon stocks 
of that forest increasing over time?
3. Audit supply chains
See questions in Table 6.

23
Table 6: Engagement questions for the forestry sector
These questions are related to the recommendation in Table 2. These should be 
straightforward for the forestry sector to answer, and should be supported by evidence and 
independently verified.. Utility companies should also be expected to provide this information 
through their supply chain audits.
Recommendation 
Forestry sustainability criteria
1. Biomass feedstocks, in the 
form of residues and waste, 
should be carefully sourced
What proportion of the wood you harvest becomes forest 
residues?  
How do you minimise the proportion forest residues that are 
made up of whole trees?
What proportion of forest residues are returned to the forest 
floor, to maintain soil health and carbon?
How do you ensure that the demand for residues and waste 
does not artificially increase its production?
2. Harvested biomass 
feedstocks should be 
carefully sourced
How do you quantify the above- and below- ground carbon 
stocks of managed forests and can you demonstrate that 
they are maintained or increased over time? 
Are your assessments of carbon stocks verified through 
independent, third party assessments? 
What proportion of your managed forest is afforested 
'abandoned' land and how do you maximise this?
3. Suppliers should maximise 
carbon stocks of managed 
forests 
Have you elimiated harvesting from natural, primary forests 
and elimated their converstion into plantation forests? 
Do you allow the forest carbon to recover following a 
harvest? 
* What proportion of the forest carbon is removed during 
each harvest?
* How long does it take for forest carbon to regrow and 
cover?
* How frequently do you harvest?
4. Suppliers should exclude 
clear-cutting
Is any of the wood you harvest from clear-cutting?
5. Suppliers should take 
a cautious approach to 
thinning
What proportion of the wood you harvest are thinnings?
What are your criteria for the type and number of trees that 
are removed by thinning, such as a maximum tree diameter 
or limit to the proportion of a forest stand removed by 
thinning?
6. Suppliers should maximise 
the proportion of harvests 
used in long-lived products
What proportion of the wood you harvest is used for long-
lived products and bioenergy? 
How do you plan to minimise the proportion of a harvest 
used for bioenergy, whilst maximising the proportion used in 
long-lived material wood products?

24
CONCLUSIONS
The carbon storage capacity of forests is 
of enormous importance to the mitigation 
of and adaption to climate change. The 
UNFCCC has estimated that globally, an 
additional $14billion (US) in financial flows 
will be required to address climate impacts in 
agriculture, forestry and fisheries in 2030.76 
Through deforestation and large-scale 
energy production that relies on biomass, we 
are trading our long-term climate resilience 
for a short-term financial gain. Currently, 
forests have more economic value when 
they are harvested, rather than left standing, 
because our economic system does not 
value forests’ important role in carbon 
sequestration and climate mitigation.77 
Demand for wood as a feedstock to biomass 
power generation has increased in the UK. 
This has resulted in increasing reliance on 
imports of wood pellets10 and feedstocks 
becoming more carbon intensive.36 The most 
carbon intensive feedstocks are whole trees 
clear-cut from natural forests, a practice that 
should be eliminated entirely.  Feedstocks 
from harvested wood should be restricted 
to thinnings, from recently afforested areas 
or existing managed forests whose overall 
carbon stocks are maintained or increasing 
over short timescales. The least carbon 
intensive feedstocks are forest residues, 
processing or agricultural waste that 
would have otherwise been incinerated or 
decomposed in landfill. The proportion of 
waste used as feedstocks to biomass power 
generation should be maximised but should 
not be scaled up to meet growing demand. 
Instead the scale of the biomass industry 
should be limited by the supply of suitable 
and sustainable waste and residues. 
We recommend that investors and banks 
no longer provide finance to new biomass 
infrastructure.  We also agree with the recent 
recommendation by the Committee on 
Climate Change that the UK Government 
should no longer provide policy support 
to large-scale biomass, as this support 
was based on the flawed assumption that 
biomass is carbon neutral. 
We recommend greater engagement with 
existing biomass operators and supply 
chains to adopt and enforce very strict 
sustainability criteria. However, we currently 
do not have the level of disclosure and 
regulation that is necessary to assess the 
climate impacts of the forestry and biomass 
power sectors. Biomass that meets the 
strictest sustainability criteria, could have a 
small part to play in the transition to a lower-
carbon economy. However, it is not a long-
term solution, nor should it divert investment 
from more sustainable, lower carbon forms 
of energy such as solar and wind, or energy 
storage which will enable us to increase our 
reliance on these. 
Rigorous scrutiny of the risks and impacts 
of biomass power generation are urgently 
needed. We urge investors and banks to 
reduce exposure to the risks associated 
with large-scale biomass power generation. 
We believe this is in line with and reflects 
investors support of the Paris Agreement

25
GLOSSARY 
Bioenergy: conversion of solid, liquid and gaseous biomass feedstocks, using several 
different processes, into energy in the form of heat, electricity, liquid biofuels or biogas.
Biofuel: liquid fuel produced from plant- or animal-derived material.78
Biomass: is any organic matter, i.e. biological material derived from animals or plants, such 
as wood and agricultural crops, and organic waste from municipal and industrial sources. 
(The use of biomass in this report refers to a specific type of bioenergy: the combustion 
or gasification of solid biomass derived from wood, often referred to as ‘woody biomass’, 
to generate electricity and heat. The wood feedstock to these processes may either 
be ‘purpose-grown’, virgin wood or waste wood (residues) from forestry activities or 
manufacturing processes).
Renewable energy (IPCC definition): is any form of energy from solar, geophysical or 
biological sources that is replenished by natural processes at a rate that equals or exceeds its 
rate of use.78
Forest Carbon Stocks
Above-ground carbon (AGC): biomass standing above ground level, comprising of woody 
stems, branches and leaves of living trees, creepers, climber and epiphytes as well as 
herbaceous undergrowth; some definitions also include dead fallen trees, course woody 
debris and the leaf litter layer.79  
Below-ground carbon (BGC): biomass below ground level, comprising of living and dead 
roots, soil mesofauna and microbial community, soil humus, charcoal and inorganic calcium 
carbonat.79  
High Conservation Value (HCV) forest: is a Forestry Stewardship Council designation used 
to describe those forests that possess one of more of the following characteristics: significant 
biodiversity values, contain rare, threatened or endangered ecosystems, provide basic 
services of nature (e.g. erosion control, carbon storage) or meet the basic needs of local 
communities (e.g. health, subsistence).17  
Managed forest: an area of trees that are managed and harvested for commercial purposes.
Natural forest: an area of trees that are undisturbed by human activity, composed of 
biodiverse, native species of flora and fauna.
Plantation forest: a type of managed forest in which trees are planted (as opposed to 
naturally regenerated), low biodiversity, often composed of monocultures of fast-growing 
species.

26
Forestry management
Abandoned land: degraded, low quality agricultural land or pasture, in a state of disuse 
because its low productivity and is not suitable for other purposes such as agriculture and 
use by local communities.
Afforestation: planting new forest on lands which, historically, have not contained forests.65  
Clear-cutting: a forestry or logging practice in which most or all trees in an area are 
uniformly cut down.
Deforestation: the long-term or permanent removal of forest cover and conversion to a non-
forested land use.79  
Reforestation: establishment of trees on land that has been cleared of forest within the 
relatively recent past.79  
Sustainable yield capacity: managing harvests volumes to ensure long-term economic yields 
and ecological integrity.
Thinning: a forestry or logging practice in which trees are removed, reducing the density of a 
forest stand and enhancing the diameter growth and volume of the residual trees.79  
Biomass feedstocks
Forest residues: the parts of harvested trees that are left over from traditional timber 
harvesting, they typically consist of branches, stem tops, bark and ‘defective’ tree stem 
pieces which are either hollow or diseased.7  
Processing residues: by-products from sawmills (or paper mills) in the form of fine residues 
(sawdust, wood flour, shaving and bark) or coarser wood chips.7 
Roundwood: logs of between 2.5’’ and 16’’ in diameter, although the exact diameter 
definitions vary between different saw-mills. Larger diameter ‘saw logs’ are often used in 
construction and the ‘small roundwood’ often used to make wood pellets.7 
Power Generation
Co-firing: combustion of two (or more) different types of materials at the same time (e.g. 
coal & biomass).  
Co-generation / Combined Heat and Power (CHP): is the use of a heat engine or power 
station to generate electricity and useful heat at the same time. 
Units
•	
tC/ha/yr = tonnes of carbon per hectare per year
•	
TWh = terawatt-hours 
•	
Mt = million tonnes
•	
gCO2/MJ = GHG intensity measured in grams of CO2 emitted for 1 MJ of energy generated
•	
KgCO2/MWh = GHG intensity measured in kilograms of CO2 emitted for 1 MWh of 
electricity generated

27
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31
The Small Print
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out between January and April 2018. During the period of analysis, the entities surveyed 
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