Papyrus is increasingly suggested as an alternative bioenergy source to reduce the pressure on forest ecosystems. However, there are few studies on the economic viability of papyrus wetlands and the benefits for local communities. We construct a village Computable General Equilibrium (CGE) model to examine whether papyrus harvesting and processing has the potential to improve local livelihoods and simultaneously counteract pressure on local forest resources. We apply the CGE model to a village in northern Zambia where overexploitation of forest resources to produce energy from firewood and charcoal poses a serious problem. The analysis is based on survey data from 105 households collected in 2015. The model results show that papyrus briquetting would be a possible alternative biofuel and that this technology improves household income and utility through labor reallocations. Higher opportunity costs lead to households switching from firewood extraction and charcoal production activities to papyrus harvesting and processing to produce bioenergy. Replacing energy supplies from firewood and charcoal with papyrus briquettes results in substitution effects between forest land and wetland and thereby reduces the pressure on local forest resources. The CGE approach allows for an economy-wide ex-ante analysis at village level and can support management decisions to ensure the success of papyrus bioenergy interventions.