It is possible to use wool instead of sandpaper, but it may not be the best option. Wool is a natural material and has some benefits that sandpaper does not have. For instance, wool can absorb water which makes it less likely to scratch your surface, and it also wears down over time reducing the need for regular applications.
Additionally, if you are using wool as an alternative to sandpaper on wood or other materials that might contain oils or greases then you should probably use a porous cloth such as muslin first in order to prevent any accidents.