European Forestry Pulse #106 🌲

Hello,

For years, forests have removed carbon and earned almost nothing for it. Last week, the EU moved to change that.

It wants to pay for carbon removals inside its biggest market. Not a pilot — the main system. Let me show you what it means.

Here's what's moving European forestry this week:

On 17 July, the European Commission proposed a major reform of the EU Emissions Trading System (ETS).

The ETS is Europe's largest carbon market. It makes heavy polluters pay for every tonne of CO₂.

The reform sets the rules for 2031–2040. It aligns the system with the EU's target of a 90% emissions cut by 2040.

The headline for forestry is one line. Permanent carbon removals will be brought inside the ETS.

To make room, the Commission would raise the overall cap by 250 million allowances.

Those cover removals certified under the EU's CRCF framework. That is the same framework we covered in EFP #103.

The removals in scope are permanent ones. Think biogenic carbon capture (BioCCS) and direct air capture with storage (DACCS).

The Commission itself would buy the removals. Then it would issue matching allowances into the market.

Read this part carefully.

This is not a payment for a standing forest. Not yet.

The ETS door opens to permanent removals. BioCCS is one of them. And BioCCS runs on biomass — much of it from forestry.

So the demand flows through the wood supply chain. It does not land on the growing tree.

International offset credits are separate again. From 2036 they may count toward the 2040 target, up to a capped share. But companies cannot hand them in directly inside the ETS. A central EU facility would manage them instead.

Translation: this is a long-horizon signal. It is not a 2026 payout.

Here is what did change. For the first time, the EU's biggest market has a legal path to buy carbon removals.

That is a compliance-grade demand signal. It is far larger than the voluntary market.

And it runs on the same CRCF certification that carbon-farming methods already use. The plumbing is being laid now.

The direction is set. Europe intends to pay for removal at scale. The first removals in are permanent ones, and the clock starts in 2031.

For context, EU carbon allowances traded around €80 a tonne in mid-July. That is up more than 10% on the year.

If you own or manage forest: You are not a direct ETS seller yet. But BioCCS puts a compliance value on wood-based carbon. Watch how the permanence rules treat your material.

If you develop carbon projects: A compliance-grade demand horizon is forming. It starts in 2031, not now. International credits are not directly usable. Read the timeline before you promise a buyer anything.

If you invest in forestry: This is a real policy tailwind for the removals thesis. It is long-dated, but it is concrete. Sources: ICAP — Commission publishes EU ETS review proposal | Homaio — EU carbon market reform: the summer's big overhaul | Bellona — Press release: EU ETS

The Forisk Timber REIT (FTR) Index rose 3.91% in the week ending 17 July. It follows a −1.29% dip the week before.

The FTR Index tracks the listed timber REITs. After the Rayonier–PotlatchDeltic merger, that is now Rayonier and Weyerhaeuser.

Why it matters: These share prices track the housing and sawlog cycle. A weekly move is an early read on sentiment.

The takeaway: One week is not a trend. But watch the direction into the Q2 earnings run. Source: Forisk weekly FTR Index Summary (subscriber email).

Sweden is one of Europe's largest wood suppliers. Its harvest sets the tone for Nordic supply.

Gross felling fell to 87.0 million m³sk in 2025. That is down from 87.7 million in 2024. It is the fourth year of decline in a row. Felling has not been this low since 2013.

Net felling came in at 70.5 million m³fub.

Why it matters: Nordic supply shapes spruce and pine fibre prices across Europe. Less wood cut means a tighter market over time.

The takeaway: Supply is tightening slowly, not sharply. Build it into your sourcing plans. Source: Skogsstyrelsen — Fellings (preliminary 2025)

In #105 we promised four reads on the same margin squeeze. Here they are.

SCA (22 July): First-half EBITDA fell 35% to SEK 2,410m. Operating profit halved to SEK 1,267m.

Stora Enso (23 July): First-half adjusted EBIT rose to EUR 319m, from EUR 301m.

UPM (23 July): First-half comparable EBIT rose 17% to EUR 471m. In Q2 alone it jumped 71%.

Two of the three improved. But look at where the money came from.

The pattern under the numbers

UPM's gains came from energy, biofuels and adhesive materials. Not from wood.

Its Finnish pulp business tells the other story. UPM calls that environment challenging. Profitability stays low even though pulpwood prices have fallen.

UPM now plans a temporary shutdown at its Kaukas pulp mill. Pietarsaari may follow. One stated reason is optimising wood sourcing.

Stora Enso improved on its new consumer board line at Oulu. That is packaging, not forest.

SCA is the most forest and sawmill exposed of the three. It fell hardest.

The wood-based businesses are still squeezed. The diversified ones escaped through energy and materials.

Why it matters: A recovering headline can hide a wood-side squeeze. Finnish pulpwood prices fell and mills still plan shutdowns.

The takeaway: Check which part of a forest company actually earned the money. If you sell pulpwood in Finland, watch those shutdown plans closely. Sources: SCA Half-year report Q2 2026 | Stora Enso Half-year Report 2026 | UPM Half Year Financial Report 2026

Map your carbon story this week. It takes 15 minutes.

The EU just set a direction. It intends to pay for removals at compliance scale. Knowing where your carbon fits tells you if this is a 2026 opportunity or a 2031 one. It also stops you overpromising to a buyer or a board.

The next time someone asks why you cut trees, you'll have thirty seconds to answer.

Right now — what do you say?

If the answer isn't ready, the Playbook is.

The EU wants to pay for carbon removals inside its biggest market. Knowing what that carbon is worth — voluntary versus compliance, today versus 2036 — is a skill. That is the skill this book builds.

I wrote the Forest-Investment Dictionary with Danish forest economist Anders Tærø Nielsen. It has 151 pages, 11 chapters, 14 printable tools, and 3 calculators. Investors learn to read a forest. Foresters learn to read a term sheet.

When the market turns, the people who can read the numbers make the better calls. The price is €99. Get yours below.

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Until Tomorrow!

Wish you all the best: Peter

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