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How much does a tree earn? - an interview with economist Zbigniew Szkop

05 of April '22

Can a tree make money? If so, how? We rarely look at urban greenery with financial benefits in mind. We talk about urban greenery from the perspective of economic science with Dr. Zbigniew Szkop, who works at the Faculty of Economic Sciences at the University of Warsaw.

Wiktor Bochenek: According to a study by American scientists, urban trees growing in New York City provide annual benefits worth more than a hundred million dollars a year. Is this possible?

Zbigniew Szkop: Yes and no. Trees provide a number of benefits to city residents. These benefits are called ecosystem services by economists. The study you cite examines the value of only a selection of ecosystem services, including the benefits of trees in cleaning the air or the benefits of combating global warming, thanks to trees' storage of atmospheric carbon in their tissues.

As for the results that the American scientists received for the ecosystem services of trees they studied, they are as reliable as possible. Indeed, similar values are obtained by research teams from all over the world. This includes our team of environmental economists from the Faculty of Economic Sciences at the University of Warsaw, which performed analogous research for trees growing in several Polish cities.

In interpreting the cited results, however, it is worth taking into account that American researchers did not study the value of all the benefits provided by trees in New York. For example, they completely ignored the role trees provide in improving urban aesthetics. Numerous other studies show that people highly value this ecosystem service of trees. In this regard, it is important to keep in mind that the amount cited - more than a hundred million dollars a year - is a minimal, incomplete value, as it only applies to selected benefits. The total value of benefits provided by trees in New York is certainly much higher.

Drzewa przy niewielkim skwerze w Amsterdamie

Trees by a small square in Amsterdam

Photo by Fons Heijnsbroek, © CC BY0

Wiktor Bochenek: Let's start with the basics, how do we count the gains, losses and costs we incur through trees?

Zbigniew Szkop: When it comes to the cost side, the situation is relatively simple. This is because every year we incur real expenses for the maintenance of urban greenery. However, the situation is different when it comes to the value of the benefits provided by urban greenery.

If I wanted to know what is the value of having a cup of coffee in a coffee shop near where I live, I would go there and check it out. If I wanted to know the value of the service of taking a cab, to a destination of my choice, I could also easily verify this by ordering such a cab. These are examples of services whose value is easy to verify, since they have a price formed on the basis of supply and demand in a competitive market.

However, not all products and services have a market. An example here is the services that nature provides for us, the aforementioned ecosystem services. This does not mean, however, that these services are worthless. On the contrary. Modern economics has a number of methods to study the value of services that are not exchanged on the market.

For example, there is no market for the view from a window to a tree instead of a busy road. But there is a market for housing. Economists, using advanced econometric methods, are able to show by how much the value of an apartment increases just because it has such a view. In this way, we are able to say what the value of this ecosystem service of trees is.

Another example is that of air purification by trees. There is no market for this service. But treating diseases associated with poor air quality costs money. Using sophisticated mathematical models, we are able to count how much air pollution trees capture and how this translates into a lower risk of respiratory diseases, the treatment of which costs money, and thus what savings trees generate in this regard.

drzewa przy niewielkim skwerze w Amsterdamie

Trees by a small square in Amsterdam

Photo by Fons Heijnsbroek, © CC BY0

Wiktor Bochenek: In which places do trees have a particularly positive impact from an economic perspective? Where do they bring these "economic" returns?

Zbigniew Szkop: As we said, trees provide a number of benefits, or ecosystem services. In addition to the aforementioned aesthetic or air-purification benefits, they cool the air on hot days, reduce rapid surface runoff, protect the climate by sequestering carbon dioxide, and many others. How much value a particular service provided by a tree will have depends primarily on how much demand there is for that service. This, in turn, depends on how many people will use it and how much it is needed. Let's explain this with the example of a tree's air purification service.

Let's assume that we have two identical trees and both clean the air of the same amount of pollutants. Nevertheless, only a few people live in the area where the first tree grows, and several thousand people live in the area where the second tree grows. Despite the fact that the trees theoretically do the same "work," i.e., capture the same amount of pollutants, the benefit of this work in terms of reduced cases of disease will be incomparably greater for the second tree.

It may also be the case that identical two trees grow in an area with a comparable population, but different air quality. Thus, a tree growing in an area with poorer air quality will capture more pollutants and thus reduce the number of respiratory diseases to a greater extent. Thus, the benefit provided by them, will be greater.

Taking the above into account, it can be seen that it is not possible to say without further analysis exactly where trees will provide the greatest benefit, but it can be said that usually the benefit of greatest value will be provided by trees in cities. This is because it is in cities that the density of residents is generally the highest, and also because many of the environmental problems, such as poor air quality, urban heat island, and excessive surface runoff, are most acutely felt in cities.

drzewo w Perth

A tree in Perth

Photo by Dietmar Rabich, © CC BY0

Wiktor Bochenek: What should be done to make the role of urban greenery more subjective?

Zbigniew Szkop: A few years ago, the Supreme Audit Office prepared a very interesting report that examined the management of urban greenery in Polish cities. In it, the NIK pointed out that in the cities audited, during the period they analyzed, nearly 17 percent fewer trees were planted than were removed. So you can see that, indeed, things are not going well with urban greenery in Polish cities, although of course the situation is not the same in every city.

There are certainly many reasons for this, but one of them is undoubtedly the lack of full understanding of the benefits provided by urban greenery. The benefits of maintaining urban greenery may seem less tangible than the real income to the city budget provided by newly built housing estates, office buildings or shopping malls. As such, it may seem that maintaining urban greenery is a luxury - a cost that not everyone can afford. However, the reality is often the opposite - we city dwellers cannot afford to live in cities without urban greenery, and the pricing of services provided by urban greenery is able to show this.

Wiktor Bochenek: If you could cite economic studies linked to greenery calculations. What conclusions do economists come to?

Zbigniew Szkop: The pioneers of research in valuing the services provided by urban greenery are the Americans. Probably the most famous study made by them in this regard was the just-mentioned analysis made by Prof. David Nowak 's team for trees growing in New York. In 2016, as part of the scholarship I received, I had the opportunity to do a research internship in the United States and prepare, together with Prof. Nowak 's team, the foundations for a similar study done in Poland.

The first such study in our country concerned Krasinski Garden in Warsaw, and in it I managed to show that the trees there, by cleaning the air of about two hundred and seventy kilograms of pollution each year, generate savings of 26 thousand zlotys per year. Later I made analogous calculations for, among others, the aforementioned trees growing in Rzeszow, as well as for trees growing in Warsaw's Wola district. This was a small study, but I think it was important because it was innovative on a Polish scale.

Ogród Krasińskich, który był obszarem badań zespołu Zbigniewa Szkopa

Krasinski Garden, which was the research area of Zbigniew Szkop's team

Photo: Cybularny, © CC BY0

The largest research so far done in Poland on this topic was on trees growing in Warsaw. Among other things, our team of environmental economists from WNE UW managed to show that trees growing along the main streets in Warsaw and park trees absorbing pollution generate savings of more than PLN 4 million each year. In addition, we asked ourselves what is the economic benefit of the fact that park trees in Warsaw store carbon. In other words, what social costs would be caused by releasing all that carbon into the atmosphere. We were able to show that such a cost would be at least a hundred million zlotys.

Using just these few cited studies as an example, we can see that urban greenery is very valuable and that it is in our interest to protect it. And this is only the tip of the iceberg. The services provided by urban greenery, as I mentioned at the beginning, are many, and as our other studies also show, the value of the other services is not any less. Therefore, one can conclude that urban greenery is a green capital that cannot be seen only as a cost, but rather as an investment with a high rate of return.

Wiktor Bochenek: Thank you for the interview!

interviewed by Wiktor Bochenek

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