Economic Value and Appraisal of Trees

Urban forests provide numerous ecological and social functions that can be translated into economic value, financial benefits, and dollar value. Urban trees increase property values and reduce energy costs through natural cooling; also, treed and forested urban areas promote tourism and recreation, which can all be transformed into monetary value (Ewane et al., 2023; Nowak et al., 2017; Wolf et al., 2020). The economic value of trees can be assessed in several ways depending on the geography, purpose of the evaluation, and who is performing the evaluation. For example, trees can be valued for their intrinsic value (e.g., diversity, complexity, beauty, spiritual significance) or the objective value of the tree in and of itself (AWES, 2021). Alternatively, urban trees can be evaluated in situ, built on the monetary value they provide based on their ecological services (e.g., stormwater management, carbon sequestration), or appraised for the cost of replacing them based on their size, health, and species. 

Tree Appraisal

In addition to measuring, assessing, and quantifying urban forest benefits and ecological services, tree appraisal is conducted for numerous compelling reasons, including official and legal valuations of urban trees. Several appraisal methods have been developed and implemented to estimate the monetary value of trees (Watson, 2002). While tree appraisal results can vary between appraisal methods and appraisers (Watson, 2002), conducting tree appraisals remains an important way to convey the significance and value of urban trees (Komen & Hodel, 2015; Purcell, n.d.).

Several methods can be used for estimating tree replacement values, particularly when estimating the value of a tree for legal disputes, sales, urban planning, and infrastructure development needs, or insurance claims. Several tree appraisal methods are used across urban areas, and all of them assess the monetary value of trees based on several common variables: species characteristics, tree size, health condition, location, and contribution to the surrounding environment (Doick et al., 2018). For example, these methods are: the Trunk Formula Method (TFM), often used for large and irreplaceable trees; the replacement cost method, used for smaller and replaceable trees; the cost approach, used to evaluate lifetime maintenance and planting costs for trees; the market approach (comparable sales), to assess the value of a tree based on market prices of similar trees; the income approach, which focuses on economic benefits of trees such for example energy savings; the capital asset valuation which estimates a value that a tree contributes to property value; ecosystem service valuation which assigns tree value based on the environmental benefits it provides such example carbon sequestration and air quality improvement; and the CTLA Guide for Plant Appraisal, an ISA approach that combines multiple tree variables such as size, species, and condition into the valuation (Watson, 2002; Szaller et al., 2019; Doick et al., 2018). 

A tree appraisal’s purpose is usually guided by specific clients’ needs and often considers handling unexpected losses, tort claims (civil claims for compensation for wrongful acts or injury), insurance claims, tax deductions, real estate assessments, or proactive planning. Once all relevant tree information is collected, the appraiser selects an appropriate appraisal method and delivers an objective valuation as a dollar figure (Purcell, n.d.; Ponce-Donoso, Vallejos-Barra & Escobedo, 2017; CTLA, 2020; Grande-Ortiz, Ayuga-Téllez & Contato-Carol, 2012).

The Council of Tree and Landscape Appraisers (CTLA) Guide for Plant Appraisal is one of the most commonly used tree valuation methods in Canada and the United States, and is considered an industry standard (Cullen, 2007; Komen and Hodel, 2015). The appraisal process requires collecting site-level information, including tree measurements and assessment, to obtain all measurable variables effectively. Tree species characteristics and size, tree condition, damage, scarring, location factors, and many more criteria determine the value of a tree. Valuing trees and landscape elements requires specialized training, expertise, and experience. Tree appraisal material and courses are available through organizations such as the International Society of Arboriculture (ISA) and ISA Ontario. CTLA methods, endorsed by the ISA and local arborist organizations, are applicable for tree valuation in legal disputes, urban planning, environmental impact studies, and insurance claims. For example, the City of Ottawa, Edmonton, Guelph, and Mississauga use the CTLA approach to assess and evaluate the value of trees affected by construction and development projects (City of Guelph, 2019; City of Edmonton, 2024; AECOM, 2022).  Smaller municipalities may lack the resources needed for complete tree inventories; collaborating with consultants or universities can provide valuable support at the city level.

Economic Value of Urban Forests – Benefits Provided

Urban trees provide a myriad of ecological services that can be translated into economic value. For example, tree benefits include increased property values (Han et al., 2024), positive impacts on real estate consumer preference (Farr, 2017), reduction in energy costs by shading buildings and pavement, and lower ambient temperatures (McDonald et al., 2024). In 2014, a TD Economics Report found that urban forests in Halifax, Montreal, Vancouver, and Toronto had a combined value of $42 billion and provided $330 million per year in environmental benefits. Depending on the city, for each dollar spent on tree maintenance, about $1.88 to $12.70 was returned in various benefits (Alexander & DePratto, 2014). These values are likely to be lower estimates, as they do not include the value of tourism, recreation, or impact on property values, human health, and social wellbeing (Farr, 2017). Urban trees provide services akin to other urban infrastructure by reducing runoff and erosion, improving air quality, saving energy, and sequestering carbon, which increases over time as trees grow (Hotte et al., 2015; Farr, 2017). 

Technology such as remote sensing (e.g., multispectral images and LIDAR) and geographic information systems (e.g., GIS and Google Maps), combined with ground-based sampling methods (e.g., plot and tree sampling, as well as data collected through citizen science), play a vital role in estimating the extent, structure, and composition of urban forests and their benefits (Hotte et al., 2015). These technologies facilitate the mapping of urban canopy extent and the collection of measurements of urban forests and woodlots in both large and small municipalities. This spatial and field information is then further used to support the ecological and economic values of trees and the services they provide. 

For instance, field measurements, along with tools like i-Tree or other tree-relevant allometric formulas, can be employed to determine the carbon sequestration rates of urban forests. By utilizing field data alongside mapped tree canopy coverage, it becomes possible to estimate the amount of carbon dioxide sequestered from the atmosphere by the entire urban tree canopy, by individual trees, and by a unit (e.g., 1 ha) of the urban tree canopy. For example, a study conducted in Canada by Pasher et al. (2014) estimated that the average carbon sequestration capacity of urban tree canopies is 2.9 tonnes of CO₂ per hectare per year.

Benefits and Value of Urban Forests – Beyond Money

Estimating the value of an urban forest can be done by appraising forest structural components such as canopy cover, species composition, and age. The many benefits of urban forests, such as carbon storage, carbon sequestration, air quality improvement, and the moderation of urban heat island effects (Han et al., 2024), also create value via co-benefits. It has been shown that some of these benefits result in co-benefits, such as decreased power usage during a heatwave (McDonald et al., 2024), and a negative correlation between urban tree canopy cover and mortality and morbidity rates during heat waves (McDonald et al., 2020). Aside from providing refuge during summer, proximity to urban forests is positively correlated with shorter hospital stays for patients recovering from surgeries and better health outcomes for pregnancies (Ulrich, 1984; Hotte et al., 2015). While more challenging to quantify, the cultural, spiritual, visual, and sensory values of urban trees are often the aspects most highly valued by the general public.