The development of wood fuel production technology has been active in Finland since 1993, when the Ministry of Trade and Industry started eight new energy technology research and development programmes, one of which is the Bioenergy Research Programme. The objective is to improve the competitiveness of indigenous fuels-wood fuel and fuel peat-compared to imported fossil fuels. Due to new, effective equipment and good logistics, production costs of fuel chips from logging residues have decreased by 25%, and are now approaching the target of 8.5 USD/MWh (45 FIM) with transportation distance being up to 80-100 km. This price target was set at the start of the Bioenergy Research Programme, but it is still valid corresponding to the price level of fuel peat and coal for big power plants. When harvesting young stands for pulp wood and energy production, whole-tree chipping and tree section logging followed by different processing methods-chain-hail techniques, MASSAHAKE-method-have been demonstrated, but they have not yet achieved wider use. CO2 emissions were calculated for the wood fuel production from logging residues, and emissions of production and combustion of wood fuel and coal, oil and fuel peat were compared. If the target of substituting 1.5 million tons of oil equivalent (toe) in Finland by 2010 is fulfilled, the reduction of CO2 emissions will be 4.2 million tons, corresponding to 6.9% of the emissions in 1996.