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Tree compensation rates: Compensating for the loss of future tree values
- Nowak, David J., Aevermann, Tim
- Urban forestry & urban greening 2019 v.41 pp. 93-103
- discount rate, economic valuation, leaf area, longevity, mortality, planting, trees
- When healthy trees are removed, common methods of compensation are either monetary or replanting new trees. Accurate monetary compensation for large healthy trees is difficult to ascertain and often uses formulas based on tree attributes such as species, size, location and condition. Compensation based on leaf area is more direct as most tree values are related to healthy leaf area. Using leaf area, a tree compensation rate can be determined (how many new trees are needed to compensate for the removal of a healthy tree). However, compensation also needs to consider the future benefits provided by both the removed tree and newly planted trees. This paper provides a new method of tree compensation based on comparing the net present value of leaf area between a removed tree and planted replacement trees. This proposed method is not intended to replace existing methods, but rather facilitate discussion and science to improve estimating tree values and compensation. Using this new approach with a three-percent discount rate and a four- percent annual mortality rate, maximum compensation rates using comparable trees reached 13.7 trees for large trees and 3.3 trees for small trees. An overall maximum compensation of 41.1 trees was reached when large trees with a one-percent mortality rate were replaced with small trees with a four-percent mortality rate. Compensation rates vary with tree size, estimated life span remaining (mortality rate), discount rates, and type of replacement tree used (large vs. small trees). Compensation for tree loss can either be through planting of replacement trees or the conversion of replacement trees to a monetary value based on local planting costs.