Ukraine is traditionally deeply dependent on fossil and nuclear energy. However, in response to global climate and energy policies, a major shift towards renewableenergy (RE) is presently underway. Apart from ample wind and solar capacities, the country has abundant bioenergy resources, mainly from agriculture and forestry.Particularly in the densely-forested Ukrainian Carpathians, wood is the most prominent bioenergy source used to meet the heat demands of households and publicbuildings. However, despite increasing forest area and timber volume in this region during the last 50 years, affordable bioenergy from forests remains scarce in manyareas. At the same time, local communities suffer from energy scarcity, energy insecurity and high energy costs.In an effort to understand how better use might be made of Ukraine's bioenergy resource, addressing sustainability goals as well as the needs of local communities,this study assesses the significance and future potential of wood energy for regional economies and households from an environmental, economic and socialperspective. The study employs a mixed-method approach combining literature review, a Best Practice contest and semi-structured interviews with forestry sectorstakeholders in rural areas of Transcarpathia and Lviv. Several reasons were identified for the scarcity of affordable bioenergy, including the export-oriented woodprocessing industry, the lack of forest road networks and machinery, the short-term character of national forest strategies in relation to bioenergy, and otherinstitutional settings that limit access to forest resources. Illegal logging, corruption, and lacks of transparency in timber markets add further difficulties. To addressthese problems and to meet the challenges defined by international climate agreements, two key innovative instruments were identified; 1) certification schemes forforest products and; 2) community-driven bioenergy initiatives (e.g. local cooperatives.). These approaches, ideally embedded in a local energy strategy developed bythe communities themselves, have the potential to transform energy and benefit communities and the local economy.