A torrefaction process operating on oxyfuel combustion concept is introduced. The working fluid employed in the process is carbon dioxide captured from the combustion products. The thermodynamic modeling of the process is carried out to determine the energy requirement, recycled CO2 flow rate, energy yield, and CO2 production rate at various torrefaction conditions. The total capital investment and production costs of the new system are also estimated. By increasing the torrefaction severity, the CO2 production rate, recycled gas mass, and the process thermal energy requirement increase, whereas the grinding energy and the energy yield decrease. A comparison made between the performance and economic parameters of the new and a conventional torrefaction processes shows that the proposed process is expected to produce torrefied wood pellet of compatible fuel quality and overall efficiency while eliminating CO2 and NOx emissions at the expense of 11.5% and 9% increase in the capital and production costs, respectively. The proposed torrefaction process requires 91.8 M$ capital investment and 113.2 $ to produce 1 ton of torrefied wood pellets with 91% energy yield and 88% overall plant efficiency. Sensitivity analysis shows that the reactor type and raw biomass costs have significant impact on cost structures.