The European Union is aiming to substantially increase the use of renewable energy. In 2007, the EU set a target of 20 % of the overall energy consumption should be derived from renewable sources by 2020. National targets based on this figure were agreed upon at the beginning of this year. As wood is currently the most important source for renewable energy, the new targets can be expected to have strong implications for wood use in Europe. In this paper, the current situation of both the material use and energy use of wood is considered, as well as the possible impacts of increased utilization of wood energy on European wood demand. The situation is analyzed from the perspective of 29 European countries as well as from the specific viewpoint of Finland and Sweden. The study shows that the availability of wood for both material and energy use will prove a major challenge for the EU if its energy targets are to be met primarily by wood.