Economics & The Fate of Ash Trees

Issue: 
March-April 2012

When emerald ash borer arrives in an area, homeowners have decisions to make. Removing and replacing an existing ash tree could involve a large initial layout of funds. Alternatively, insecticide treatments could be used to save the existing tree. This approach usually involves smaller, but ongoing payments through time. It is important to remember that doing nothing is not likely an option; for those with ash in the vicinity of buildings, utility lines or roadways, a cost will be incurred sooner or later. 

So, should you protect your ash? To assist homeowners in making this decision, we have developed a simple economic model (Canadian Forest Service – Ash Protection Model; CFS-APM) that tracks the ongoing cost of treatments versus the one-time costs associated with removal and replacement. Keep in mind that, since treatment costs are ongoing through time, they will eventually outweigh the cost of removing and replacing a tree. The question that our model helps to address is how long could you treat a tree and still be financially ahead of cutting it down and starting over. For a medium-sized ash tree (30 cm DBH) with average treatment, removal and replacement costs, this value works out to about 10 years. 

Hard to Quantify Figures
Things get slightly more complicated when one takes into consideration some of the indirect benefits that urban trees provide, such as increased property values, energy savings and runoff and pollution benefits. Arborists know the importance of trees for these kinds of values, but quantifying them can be very difficult. 

Gregory McPherson and colleagues at the US Forest Service have attempted to place dollar values on these benefits. For example, they found that a 40-year old maple tree in New York City provided homeowners with an average energy savings of about $55 per year. This means that when you cut down an existing tree, you not only incur costs related to removal and replacement, but you also lose the benefits provided by the tree. When these benefits are taken into account, the same medium ash tree described above can be treated for about 20 years before the accumulated treatment costs start to outweigh the costs related to removal and replacement. 

While the dollar values attributed to these benefits are clearly coarse estimates, the important thing is that the model provides a framework to examine the question and a general sense of how these contributions could affect decisions around ash conservation. 

Treat or Remove?
So how might all this help a homeowner decide what to do with an ash tree that is under threat of attack by EAB? Some homeowners might like to a see cash flow analysis when making financial decisions. Such results are particularly useful when applied to a specific time horizon of interest. For instance, if a homeowner is planning to sell his/her home within 10 years, then the numbers presented above suggest that the treatment approach may be financially appealing, especially if there is reason to believe the tree in question really adds to the value of the home. Similarly, there is evidence to suggest that EAB populations may crash about 10 years after an area is initially infested. If treatments could be applied less frequently or stopped altogether at that point, the treatment approach would again be very attractive. 

As part of our study, we explored which factors had the biggest influence on the decision to treat or remove a tree. Not surprisingly, we found that the attractiveness of the treatment approach was highly sensitive to the cost of treatments; thus it is important that homeowners obtain the best possible price from applicators. Since treatment costs are directly proportional to tree size, a somewhat surprising finding was that, assuming average treatment, removal and replacement costs, small trees (e.g., 15 cm DBH) could be just as attractive to treat as larger trees. 

A subtle but very important consideration in this kind of analysis is the “cost of time” or what economists call the “discount rate.” This is the value that people place on costs or benefits occurring in the future. Some people place a high value on time; think about teenagers who like to live in the here and now or aggressive investors who expect a high rate of return on their investments (e.g. 10% or higher), or even people who have poor credit ratings and have to pay high interest rates for borrowing. Individuals with a high discount rate should carefully consider the treatment approach because it results in a series of delayed payments through time. With high discount rates (e.g. >12%), the number of years before the treatment costs outweigh the removal costs can be very long.

Test Drive it Yourself
An interactive version of CFS-APM is available online. See the bottom box on the left sidebar for an explanation of model inputs and outputs and access to the model. Users can input information that is specific to their situation, such as quoted removal, replacement and treatment costs as well as an appropriate discount rate. They can also select which of the benefits outlined above they would like to include in the analysis. Model outputs include graphs and tables that show how financially ahead/behind the user would be at any given point in time by treating a tree versus removing and replacing it. Users can also easily vary the model inputs if they are unsure about the actual numbers. We hope this web application assists homeowners in making informed decisions around the fate of ash trees threatened by EAB. It may also be of interest to professional arborists as a way to educate clients on the trade-offs involved in removing or treating ash trees. Further details on this study will be available in ISA’s Journal of Arboriculture and Urban Forestry later this year.  

To contact author Dan McKenney
Natural Resources Canada, Canadian Forest Service – Great Lakes Forestry Centre, Sault Ste. Marie, Ontario, email: Dan.McKenney@NRCan.gc.ca

Our mission is to enhance and promote the care and benefit of trees for present and future generations in Ontario through education, research and awareness.