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The possibility of recovering energy from biomass residues has attracted a lot of research interest due to the environmental problems associated with burning coal. Wood wastes generated from construction and demolition activities and other wood product wastes can be a good potential source of renewable energy. The present study was conducted by using Hong Kong as an example to assess the environmental sustainability of converting recycled wood wastes (from construction and demolition activities and other wood product wastes) to produce wood pellets for direct energy generation. The chemical and physical characteristics of different types of wood product wastes were tested. An attributional lifecycle assessment approach was used to assess and compare the environmental impacts and sustainability for heat generation from the pelletized bio-fuel and coal. The test results showed that the energy content, chemical compositions and the trace metal concentrations all met the relevant standards. The results also showed that significant impacts on health, ecosystem, climate change and resources damage can be potentially avoided by using wood pellets instead of coal for energy generation. The overall findings demonstrated that the proposed “energy recovery” approach for using wood pellets as a bio-fuel in Hong Kong is environmentally sustainable, which can provide an alternative route for managing wood product wastes with the added benefits of energy recovery, and may be more applicable in mega cities especially when city-based incineration is a concern. [ABSTRACT FROM AUTHOR]