Factbox: Biomass energy, carbon and forestry

(Reuters) - Forest and farmland together cover more than three quarters of EU territory, but their role in capturing and releasing carbon emissions is not fully documented.

Proposals to tighten the way emissions from agricultural and forest land are calculated will be debated over the coming months in Brussels.

The following outlines the situation so far.

WHAT IS BIOMASS?

Biomass-based fuel is the oldest source of consumer energy known to mankind and the largest source of EU renewable energy.

It comprises renewable organic matter, such as wood, agricultural crops and agricultural and municipal waste. The most commonly used form is wood pellets, which include pellets for residential and industrial use, and are relatively easy to transport.

In the first instance, pellets are made of by-products, such as saw dust and shavings, but as demand outstrips supply, nations have had to seek other sources of woody feedstock.

Woody biomass pellets have the potential to become a tradeable commodity, like other forms of fuel, but so far they carry large risks, are not transparent and standards vary.

As a step towards global biomass trading, Dutch-based energy exchange APX-ENDEX in November last year launched the first biomass exchange.

Utilities are keen for standardization.

Denmark's Dong Energy "calls for the urgent development of common European sustainability criteria, which cover the origin, production and consumption of solid biomass for energy," a spokesman said.

For now, Dong mainly imports wood pellets from other EU countries, but anticipates importing from outside the EU as demand rises.

EUROPE IS THE BIGGEST USER

The demand for biomass pellets in Europe has increased rapidly, accelerated by the agreement of a 2020 target to raise the share of renewables in the energy mix to 20 percent.

Biomass is expected to account for about half of the renewables share and has the benefit of helping to provide reliable baseload power. Wind and solar, in contrast, are intermittent.

The International Energy Agency (IEA) has predicted the European Union is likely to remain the largest wood pellet consumer in the world.

It said EU demand could range between 20 million and 50 million tons by 2020, depending on factors such as the price of heating oil and national policies on co-fired power generation.

East Asia is also expected to show very strong growth and may be "a close second" in 2020, the IEA said.

BIGGEST PROVIDERS

Rising demand in the European Union has stimulated large investments in new pellet plants and increased production in nations including Canada, Russia and the United States.

Russia, already a fossil fuel energy giant, has the largest forest area. It constitutes around 20 percent of the world's forest resources.

Within the EU, the Polish pellets market only began in 2003, the IEA said, but its rate of growth is rapid.

Production has been mostly exported, but domestic production is rising as woody biomass replaces some of Poland's predominant coal-fired generation.

NEED FOR IMPORTS?

Between 2008 and 2010 the production of wood pellets in EU increased by 20.5 percent, reaching 9.2 million tons in 2010 - or 61 percent of global production - figures from IEA Bioenergy showed.

In the same period, EU wood pellet consumption increased by 43.5 percent to reach over 11.4 million tons in 2010, equal to nearly 85 percent of the global wood pellet demand.

The European pellet industry still covered 81 percent of the EU demand in 2010, but the gap between production and consumption in EU has been growing rapidly.

IMPACT ON FORESTS

Since the 1990s, the forest area in Europe has been increasing steadily.

However, environmentalists say that is a short-term view and are worried biomass for energy could wipe out swathes of the world's forests. Where forests survive, they warn old trees are replaced with saplings, which have less value as a carbon store, and the variety of planting is not maintained.

"Compared to the over-cut we have done for centuries ... the balance is still that we take out wood quicker than the carbon is replenished," said Jutta Kill, carbon trading and climate change campaigner at non-governmental organization FERN.