Although biomass fuels are widely recognized as a viable alternative to fossil fuels, their uncontrolled and uncritical use can also have negative consequences for the environment. The quality of the biomass used for combustion is a very important issue, as residential heating systems generally do not have flue gas cleaning systems. One of the biggest threats to the environment is the emission of heavy metals contained in the fuels into the atmosphere. If the biomass, i.e. its ash, is also deposited on the heating surfaces, which reduces the efficiency of the combustion system, this problem is exacerbated. Considering the fact that air pollution is constantly increasing during the heating season in Serbia, and a large part of the pollution source are appliances that are not equipped with flue gas purification systems (mainly households), this issue is of particular importance. Wood pellets are becoming increasingly popular as a heating fuel, as they have a higher energy density compared to other types of biomass and are easier to handle. Since the production and use of wood pellets in Serbia is increasing year by year, this study investigated the physico-chemical properties of wood pellets (by partial proximate and ultimate analysis, heating value of the fuel, and heavy metal content). In addition, the characteristic melting points of the ash were determined, which serve as indicators of the fuel’s tendency to form deposits on heating surfaces. The heavy metal content was also used to assess the impact of wood pellets on the environment and thus on human health. In order to compare the results obtained and assess the impact, the same analyzes were carried out on a sample of domestic coals. This study confirms the beneficial properties of upgraded wood biomass – wood pellets – compared to coal.