The economic value of trees in urban areas: estimating the benefits of Adelaide’s street trees

Phillip Killicoat, Eva Puzio & Randy Stringer – School of Economics and Centre for International Economic Studies, University of Adelaide

Introduction and Overview

As populations become increasingly urbanised, national governments to local councils are recognising that the trees that line our streets, fill our parks and shade our houses make up an urban forest. Urban forests provide multiple benefits that go far beyond adding aesthetic beauty to our neighbourhoods. Trees in parks, streets and yards, conserve energy, reduce carbon dioxide in the atmosphere, improve air quality, reduce storm runoff, and enhance the beauty of our communities by adding colour, texture, and form to our landscapes.

In addition, no matter where trees are located, they represent an interdependent part of complex ecosystems capable of providing a wide range of economic, social and environmental benefits. All these benefits should be considered when attempting to measure the economic, social and environmental benefits of our street trees. These benefits and services, however, are valued differently by different people and different groups in society. Local, regional, national and international interests in our urban trees and the resources they provide also differ greatly and tend to shift over time.

As interests shift and expectations conflict, difficult policy and management challenges are created, requiring innovative national, regional and local strategies that better integrate urban trees into community development efforts and balance economic, social and environmental needs among local, national, and even international interests. The emerging views of what urban trees are and what they contribute require local governments to search for pragmatic management strategies that deal coherently with both the contributions of trees to urban development and to search for organisational structures to make better use of these contributions.

The roles of urban forestry in general, and street trees in particular (ie., the knowledge, concepts, institutions and practices through which multiple and competing demands for trees are managed), are changing as well. The changes are emerging as awareness grows of how local communities control and depend on trees and urban forests, prompting efforts to strengthen local stakes in urban forestry and street tree management, programs and activities.

Developing effective forestry strategies and policies involves an array of difficult choices. Some choices result in inefficient resource use because many essential benefits and services of street trees, such as aesthetic values, watershed protection, conservation, biological diversity and climate regulation are not priced. Markets with corresponding prices just do not exist for many important street tree services and benefits. The result is that street tree decisions are often biased because the information is lacking.

An important message of this paper is that it is very difficult to address the total economic, social and environmental benefits of street trees because of the multiple roles and competing interests. To some, street trees represent a nuisance, dropping their fruit, branches, and leaves, raising sidewalks or shading their ‘heritage’ roses.

To others, street trees are a noise barrier and an air filter, adding value to their neighbourhood and their properties.

Urban forests as part of the development process

In general, Australia’s forests need to be better recognised as an integral part of national and urban economies. Trees and forests contribute to urban development in many ways, including as natural capital, as production inputs and as environmental goods. Several factors help explain how urban trees contribute to Adelaide’s development strategies.

First, urban trees are undergoing ‘urbanization’. Urban trees are increasingly managed for their range of resource flows, their ability to support urban welfare, and their capacity to promote growth opportunities. Urban trees provide large albeit different ranges of goods and services for virtually all patterns of urban settlement and livelihood.

Second, urban development strategies are beginning to include the capital values of forests in policies and programs that modify tree stocks, qualities and distributions. Urban trees are more widely acknowledged as both productive capital stocks and components of public infrastructural systems. As ecological analogs of industrial capacity and physical infrastructure, urban trees are entering the central equations of urban growth, often with new definitions of what trees are and do.

Advances in accounting practices make it possible to explicitly incorporate the capital value of trees as productive stocks, and to assess the effects of changes in them on productive capacity. Conventional accounting systems overstate national income in two ways. First, the accounts disregard the depreciation of tree capital. Second, the costs of mitigating or offsetting the side effects of resource depletion (eg. electric power reducing contributions of urban trees) are not subtracted from national income. This sends the wrong message about the full contributions that urban trees make.

As infrastructure, street trees provide services that otherwise would require capital expenditures or reductions in human well-being. Urban trees cool cities, conserve energy, reduce runoff, and absorb pollutants, substituting for more conventional infrastructure that otherwise would be needed.  Strategically placed trees can reduce home air conditioning needs by providing shade on buildings, houses and street pavements and sidewalks. Although the concept of urban forests as infrastructure is not yet widely held, the absence of trees clearly requires constructed infrastructure at a cost to other potential uses of scarce capital.

Third, urban trees represent productive assets that can be used as a means for attaining urban development objectives, including attracting new investment and growth. Community tree programs also encourage civic participation. For all of these reasons, urban forest politics and policies need to evolve out of a narrow sectoral prerogative to enter broader mainstream political interests involving highly diverse groups. The emergence of organisations like TREENET demonstrates how urban forests are gradually becoming topics of discussion among articulate groups of tree specialists, city dwellers, scientists and educators.

Estimating the benefits and costs of street trees in Adelaide

Estimating the financial, economic, social and environmental benefits and costs of Adelaide’s street trees requires a detailed study well beyond the scope of this report. Nevertheless, inferences from other studies on the value of trees provide useful insights into the costs individuals, communities and taxpayers nationwide would be facing.

For example, the benefits trees provide for climate modification and energy conservation is crucial for South Australian residential and commercial offices. Some 95 percent of South Australia’s population lives in urban forests and a major part of the state’s electricity consumption is due to heating and cooling. The following examples from a range of reports illustrate the economic value of these benefits to other communities[1].

Air temperature: reductions from 1 to 8 ºC can be expected due to the presence of tree cover. For instance, temperatures in a Davis, California neighbourhood were as much as 7 ºC cooler than recorded at the same time in a nearby unirrigated field[2].

Wind speed: reductions in wind speed of up to 10 percent can be obtained by providing a tree canopy. This may cause small increases in cooling load in some cases, somewhat larger reductions in heating load more than offset the increased cooling load.[3]

Building energy use for heating and cooling:  Trees reduce building energy use by lowering temperatures and shading buildings during the summer, and blocking winds in winter Trees also increase energy use by shading buildings in winter, and may increase or decrease energy use by blocking summer breezes. Thus, proper tree placement near buildings is critical to achieve maximum building energy conservation benefits.

When building energy use is lowered, power plants pollutant emissions are lowered. Lower pollutant emissions generally improve air quality and lower nitrogen oxide emissions, particularly ground-level emissions, may lead to a local increase in ozone concentrations under certain conditions due to nitrogen oxide scavenging of ozone. The cumulative and interactive effects of trees on meteorology, pollution removal, and VOC and power plant emissions determine the overall impact of trees on air pollution.[4]

Shade: Trees shading building surfaces reduce a major source of heat gain and hence air conditioning cooling load. Reduced solar heat gain in winter leads to small increases in heating load. Annual air conditioning savings from 3 trees, each 25 feet tall around a typical California residence, ranged from $23 in San Diego California to $83 in El Centro California[5].

A number of studies document the effects of urban trees on energy use and air quality[6]:

• Direct shade from the proposed planting of 11 million trees in the Los Angeles basin is predicted to result in a $50 million reduction in annual air conditioning bills;
• Cooling of air by these trees will save an additional $35 million annually;
• Cooler air temperatures reduce smog concentrations by 6%, resulting in an estimated savings of $180 million annually, assuming an offset commodity market existed for ozone;
• The total present value of these benefits for a single tree is $211 assuming a 20-year service life and a 3% real discount rate;
• The cost of a tree planting program is estimated to be $35 per tree, resulting in a benefit-cost ratio of 6.0

Sacramento Shade [7]

• From 1990 to 1996, over 200,000 trees were planted through Sacramento Shade, a partnership between the Sacramento Municipal Utility District (SMUD) and the Sacramento Tree Foundation.
• Sacramento Shade has a benefit-cost ratio (BCR) of 1.1. This BCR includes benefits from direct shading only. If air temperature cooling effects are considered the BCR doubles to about 2.2.

Sacramento County [8]:

• Each year about 1,300 GWh (1GWh = 1,000,000 kWh) of electrical energy is used for air conditioning in Sacramento County, at a retail cost of about $105 million.
• The 6 million trees that comprise Sacramento’s existing urban forest are responsible for annual savings of approximately 157 GWh of air conditioning electricity due to shading and cooling effects.[9]
• Energy conservation stemming from trees saves Sacramento residents approximately $19.8 million each year.
• The 6 million trees in Sacramento County absorb 1,457 m tons of air pollutants annually (ozone, nitrogen dioxide, particulate matter) with an implied value of $28.7 million.
• Through energy conservation these trees reduce emissions of carbon dioxide from power plants, as well as directly remove atmospheric carbon dioxide during their growth process and store it as woody biomass. Approximately 238,000 m tons of CO2 are removed by the region’s urban forest each year, with an estimated value of $3.3 million.[10]
• These environmental benefits total approximately $8 per tree per year and increase to about $90 once benefits such as increased property values, scenic beauty, wildlife habitat, community bonding, and recreation are added. Sacramento residents are estimated to spend about $5 to 10 per tree each year for watering, pruning, pest/disease control, and removal of dead trees. The Sacramento City Tree Services Division spends about $20 per tree to manage 150,000 street and park trees. Hence, initial research indicates that benefits are several times greater than costs. [11]

Removal of Air Pollutants:

Trees remove gaseous air pollution and some airborne particles. Some particles can be absorbed into the tree and others returned to the atmosphere (by rain back to the ground with leaf and twig fall). New York City trees removed an estimated 1,821 metric tons of air pollution at an estimated value to society of $9.5 million in 1994. The value in other U.S. cities included Atlanta (1,196 t; $6.5 million) and Baltimore (499 t; $2.7 million).

Large healthy trees greater than 77 cm in diameter remove approximately 70 times more air pollution annually (1.4 kg/yr) than small healthy trees less than 8 cm in diameter (0.02 kg/yr).[12]  In urban areas with contiguous forest stands tree cover, short-term improvements in air quality (one hour) from pollution removal by trees were as high as 15% for ozone, 14% for sulfur dioxide, 13% for particulate matter, 8% for nitrogen dioxide, and 0.05% for carbon monoxide[13]

Trees serve multiple functions function as “nature’s air conditioners” by cooling urban heat islands and shading buildings. As long as trees are growing, their rate of uptake of CO2 through photosynthesis is greater than their release of CO2 through respiration. Trees around buildings can reduce the demand for heating and air conditioning, thereby reducing emissions associated with electric power production. Annual CO2 reductions achieved through shade tree programs could offset about .2 to 2% of annual emissions. Not only that, but tree planting and stewardship programs can provide many social, environmental, political and public benefits to utilities as well.

A study on Tree Guidelines for San Joaquin Valley Communities quantified the benefits and costs of “green infrastructure” to increase awareness and investment in urban and community forests. The study found that average annual net benefits from large trees such as a London plane can be as much as 6 times greater than from small trees like crape myrtle (the most frequently planted street tree in California). Average annual net benefits (benefits -costs) for a small, medium, and large street tree were $1, $26, and $48, respectively. The Guidelines also describe optimal configurations of trees, recommend tree species for different situations, and identify sources of funding and technical assistance. In June we co-hosted with LGC a one-day workshop on “Strategies for Supporting and Funding the Urban Forest” to follow-up on the interest generated by the Guidelines. We regard this publication-workshop format as a model to replicate in other regions as funding becomes available. What is the potential increase in tree plantings in Australia as a result of a carbon credit trading scheme?

The potential value of carbon credits

Uncertainty about the rules for international trading of carbon credits and the emission allowances, sequestration and the related uncertainties associated with forecasting the future to make the prediction of probable permit prices a difficult task. Some emission permit price predictions have arisen from studies that employ various mathematical models. The studies may tend to overstate the potential permit prices suggesting a range of permit price predictions, from $10/tonne to $50/tonne. Carbon credits would have to be below the permit price for them to be an attractive alternative strategy.

Cost-benefit study of Modesto California’s urban tree management

A benefit-cost analysis of Modesto California municipal urban forest revealed that for every $1 spent on the 92,000 city-owned trees, residents received nearly $2 in benefits.[14] On average the city spends $29 per tree on management with residents receiving an estimated $55 a year in benefit: a net annual benefit of $26 per tree. The largest benefits are from air pollutant uptake, air conditioning energy savings, and aesthetics. The majority of the city’s expenses (74 percent) are for mature tree care. The study concludes that without continued program funding to maintain the health of these trees, the benefits they produce will be lost prematurely. Some 14 per cent of the current tree management budget is spent on sidewalk repair, current studies examining strategies for reducing sidewalk damage have potential to save residents a substantial amount. These strategies include: 1) directing tree roots away from paving such as propagating trees with vertical rooting patterns, 2) engineering designs that are less costly to repair, and 3) providing more space for tree roots through design and planning.

Table 1 summarises many tree benefits, including various estimates of the values associated with those benefits.[15]

Table 1   An overview of Tree benefits: selected studies

Source: Kim D. Coder Identified Benefits of Community Trees and Forests, The University Of Georgia Cooperative Extension Service, Forest Resources Unit Publication, For96-39, University of Georgia, 1996.

Calculating the gross benefits of Adelaide’s street trees

Quantifying the exact net value of Adelaide’s street trees is beyond the scope of this paper. Instead, the aim here is to provide an overview of the kinds of benefits and costs that should be considered and estimated, especially for some of the benefits. The costs of street tree management will vary by council, so the responsible officials are best placed to quantify the costs per tree.

The core benefits street trees provide can be captured as follows:

B = E+A+C+H+P+F

Where

• B = street tree annual benefits
• E = annual price of energy savings (cooling and heating);
• Q = annual price of air quality improvement( pollutant uptake and avoided power plant emissions);
• C = annual price of carbon dioxide reductions;
• H = annual price of stormwater runoff reductions;
• P = annual price of property value and related benefits;
• F = annual savings for reductions in repaving streets.
• A suggested formula for estimating annual costs is:
• C = M+T+R+D+I+S+L+A

Where

• C = annual costs of street trees;
• M = annual price of tree planting;
• T = annual price for pruning;
• R = annual price of tree removal;
• D = annual price for pest and disease control;
• I = annual price for repairing tree-damaged infrastructure;
• S= annual price of litter and storm clean up;
• L = annual insurance costs for street tree liability;
• A = annual price for program administration.

Our assumptions include the following:

• The estimated number of street trees in Adelaide is 128,000 (based on 1927km of roadsides;
• If all Adelaide’s street trees were removed summer temperatures would be from .5^oC to 2^oC warmer due to the heat island impact–lack of evapotranspiration and, most importantly, shade on paved streets and sidewalks;
• The average Adelaide household spends $193 on air conditioning due to heat (more than $80 million per year);
• Spending on air conditioning energy consumption would increase by $20 per household per year if street trees were removed or an increase in 57 million kWh power consumption;
• Differences in street tree growth rates, size, leaf area, and canopy are ignored and a typical medium-sized tree is used for a typical tree;
• Street tree CO₂ sequestration is offset by CO₂ released but CO₂ is reduced due to reduced power consumption;
• Air Pollution (Ozone, NO₂, SO₂,PM₁₀,VOCs, and BVOCs) are based on California data (city of Buena Vista);
• Power supply in Adelaide is 50 -50 gas and petroleum with .2299 grams carbon per kWh for petroleum and .1562 grams carbon per kWh for gas;
• Street trees contribute 1 percent to average house values (studies suggest 1 to 3 percent) and the average house is $145,000;
• Air quality price is based on average market value of pollution reduction credits in Southern California, USA;
• Our estimated residential energy use for summer cooling is given in the table below; we ignore commercial and industrial savings, but suggest additional savings of around 40 percent of total residential or $3.3 million or $25.6 per street tree;

Sources: Paul Spicer: AGL; ABS Census 1996. Gross annual Benefits from a typical

Adelaide  Street Trees

Our estimate of the gross benefits of a typical Adelaide street tree is $172. As the assumptions above suggest, other than energy savings these numbers are based on extrapolations from other studies in cities with similar climates to Adelaide. These estimates represent only a rough idea of the average annual benefit of a typical street tree in Adelaide. Without, adequate data on prices, tree numbers, and proper computer simulations the numbers only represent an initial ‘guestimate’. Moreover, data is needed on how benefits (and costs) differ between tree varieties and tree sizes. However, the authors are confident that the gross benefits would actually be significantly higher if a proper study could be undertaken. The aim here is to provide this initial study to encourage others to confirm or contradict our findings.

[1]  This material is from Simpson, J.R. and E.G. McPherson. 1999. Energy and air quality improvements through urban tree planting.  In: Proceedings of the Ninth National Urban Forest Conference, Sept. 3-11, Seattle, Washington, American Forests, In Press.

[2] Myrup, L.O., McGinn, C.E. and Flocchini, R.G., 1993: An Analysis of Microclimatic Variation in a Suburban Environment. Atmospheric Environment. 27B, 129-156.

[3] Heisler, G.M. 1990. Mean wind speed below building height in residential neighbourhoods with different tree densities. ASHRAE Transactions. 95(Part 1):1389-1396. and Heisler, G.M. 1990. Mean wind speed below building height in residential neighbourhoods with different tree densities. ASHRAE Transactions. 95(Part 1):1389-1396.

[4] David J. Nowak 1999, The Effects Of Urban Trees On Air Quality USDA Forest Service, Syracuse, NY.

[5] Simpson, J.R.; McPherson, E.G. 1996. Estimating urban forest impacts on climate-mediated residential energy use. In: Preprints of 12th Conference on Biometeorology and Aerobiology. Boston. American Meteorological Society. pp. 462-465.

[6] Ibid

[7] Simpson, J.R. and E.G. McPherson. 1998.  Simulation of tree shade impacts on residential energy use for space conditioning in Sacramento. Atmospheric Environment: Urban Atmospheres, 32:69-74.

[8] McPherson, E.G. 1996. Urban forest landscapes, how greenery saves greenbacks. Wagner, C., ed. 1996 Annual Meeting Proceedings, American Society of Landscape Architects. Washington, DC. ASLA. pp. 27-29.

[9] Simpson, J.R.; McPherson, E.G. 1995. Impact Evaluation of the Sacramento Municipal Utility District’s Shade Tree Program. Davis, CA. USDA Forest Service, Western Center for Urban Forest Research. 35p.

[10] McPherson, E.G. 1998. Atmospheric carbon dioxide reduction by Sacramento’s urban forest. Journal of Arboriculture. 24(4): 215-223.

[11] McPherson, E.G.; Simpson, J.R.; Scott, K.I. In Press. Estimating cost effectiveness of residential yard trees for improving air quality in Sacramento, California, using existing models. Atmospheric Environment:Urban Atmospheres. McPherson, E.G. 1998. The Sacramento Urban Forest Ecosystem Study: Urban Greenery Saving Greenbacks. In: Kollin, C. ed. Cities by Nature’s Design: Proceedings of the 8th National Urban Forest Conference. Washington, DC: American Forests: 170-173.

[12] Nowak, D.J. 1994d. Air pollution removal by Chicago’s urban forest. In: McPherson, E.G, D.J. Nowak and R.A. Rowntree. Chicago’s Urban Forest Ecosystem: Results of the Chicago Urban Forest Climate Project. USDA Forest Service General Technical Report NE-186. pp. 63-81.

[13] Nowak, D.J. and Crane, D.E. In press. The Urban Forest Effects (UFORE) Model: quantifying urban forest structure and functions. In: Hansen, M. (Ed.) Second International Symposium: Integrated Tools for Natural Resources Inventories in the 21 st Century. USDA Forest Service General Technical Report.

[14] E. Gregory McPherson , California Trees: Exploring Issues in Urban Forestry 10(3): 5,9. 1999.

[15] Kim D. Coder Identified Benefits of Community Trees and Forests, The University Of Georgia Cooperative Extension Service Forest Resources Unit Publication, For96-39,University of Georgia, 1996.