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 There is uncertainty to what degree making heat or electricity by burning wood pellets contributes to global climate change, as well as how the impact on climate compares to the impact of using competing sources of heat. Factors in the uncertainty include the wood source, carbon dioxide emissions from production and transport as well as from final combustion, and what time scale is appropriate for the consideration.

A reportby the Manomet Center for Conservation Sciences, "Biomass Sustainability and Carbon Policy Study" issued in June 2010 for the Massachusetts Department of Energy Resources, concludes that burning biomass such as wood pellets or wood chips releases a large amount of CO2 into the air, creating a "carbon debt" that is not retired for 20–25 years and after which there is a net benefit.In June 2011 the department was preparing to file its final regulation, expecting to significantly tighten controls on the use of biomass for energy, including wood pellets.Biomass energy proponents have disputed the Manomet report's conclusions,and scientists have pointed out oversights in the report, suggesting that climate impacts are worse than reported.

Until ca. 2008 it was commonly assumed, even in scientific papers, that biomass energy (including from wood pellets) is carbon neutral, largely because regrowth of vegetation was believed to recapture and store the carbon that is emitted to the air.Then, scientific papers studying the climate implications of biomass began to appear which refuted the simplistic assumption of its carbon neutrality.

According to the Biomass Energy Resource Center, the assumption of carbon neutrality "has shifted to a recognition that the carbon implications of biomass depend on how the fuel is harvested, from what forest types, what kinds of forest management are applied, and how biomass is used over time and across the landscape.”In 2011 twelve prominent U.S. environmental organizations adopted policy setting a high bar for government incentives of biomass energy, including wood pellets. It states in part that, biomass sources and facilities qualifying for (government) incentives must result in lower life-cycle, cumulative and net GHG and ocean acidifying emissions, within 20 years and also over the longer term, than the energy sources they replace or compete with.
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