Evaluating drivers, policies, and efficiency of wood pellet exports from the United States: An application of the stochastic frontier gravity trade model

Abstract

Global wood pellet markets have substantially grown over the past two decades. The United States (US) has been a major exporter of wood pellets, particularly to the United Kingdom, European nations, and lately Asian countries. In this study, we develop and estimate a stochastic frontier gravity trade model to assess various key trade determinants and policies driving wood pellet exports from the US. Moreover, we evaluate the impact of ongoing conflict between Russia and Ukraine on global wood pellet trade. Findings suggest that US gross domestic product (GDP), distance, importer electricity production from combustible renewables, importer's domestic biomass consumption incentives, and importer's sustainability criteria significantly lead to an increase in US wood pellet exports. In contrast, importer's GDP and forest area are found to be negative drivers of US wood pellet exports. Similarly, the ongoing Russia-Ukraine conflict is estimated to have a positive influence on US wood pellet exports. Lastly, the efficiency results suggest that from 2012 to 2023, US wood pellet exports were 40.5 % efficient, on average, indicating a significant potential to increase wood pellet exports from the US. The findings shed light on the export market dynamics and policy drivers, implications of the Russia-Ukraine conflict, and the efficiency potential of the US wood pellet industry.