Washington, DC (June 16, 2014) – Craig Alexander, Senior Vice President and Chief Economist for TD Bank Group, shares the back story on TD’s report, released last week, assessing the economic value of Toronto’s urban forest. The Toronto Star reported: “When a bunch of economists write an ode to City of Toronto trees, you just know the leafy, wooden urbanites are having a moment.” Why are TD economists making the case for a bigger tree canopy? Read our interview:
Craig Alexander: The big headline is that the urban forest in Toronto is very significant and has a substantial impact on the quality of life in the city. The effect trees have is more far reaching than people think. There are 10 million trees in Toronto, covering close to a third of the city. While the impact of a single tree is actually quite modest, when you aggregate up to 10 million trees, the effect is quite stunning.
When you think about a tree, it does a variety of things. Trees have an impact on wet weather flow, air quality, and energy savings.
For example, take the impact of trees in terms of absorbing air pollutants. We estimate the trees are removing 19 thousand metric tons. To put this in context, that’s equal to the pollution that is emitted from over 1 million automobiles each year. Imaging how much worse the air quality would be if you didn’t have the trees providing that effect.
Another example. The trees provide a cooling effect. If a third of the city is covered by trees, it saves $6.5 million each year in energy costs. A young health tree provides the same cooling effect of 10 air conditioners operating 20 hours a day for an entire year.
In the city of Toronto, the urban forest also redirects 25 million cubic meters of water. These are not putting impacts on infrastructure. It’s reducing property damage and ground erosion among other things. And if you’re concerned about carbon, trees sequester carbon. For Toronto, the absorption is equivalent to 700,000 automobiles and what they emit each year. Download the full report.
ACTrees: Why is TD’s lead economist analyzing the value of trees to a city?
Craig Alexander: A couple of reasons. My group also acts as a policy think tank. One of the areas where we do research is the environment, and we have a full-time environmental economist. This is the first of our reports related to “natural capital.” Economics measures GDP, but there is a lot that doesn’t get measured, including the value of the environment.
The other reason is that within TD Bank we have a very strong commitment to the environment, including a Chief Environmental Officer. TD has annual initiatives around tree planting, and we have been championing tree planting for years.
The challenge we have on public policy and environmental issues is at the end of the day, you have to have a dollars and sense argument on your investment. This kind of data also really helps politicians and government officials to make decisions. Everyone is facing fiscal constraints.
On the other hand, we can’t be dismissive of things we can’t measure because those can be really important. But we need to economically appreciate what trees do. In the aggregate the numbers are really impressive.
ACTrees: TD has also shown its commitment to urban trees by working with nonprofits, including ACTrees, to support greening efforts in the US and Canada. What is TD’s interest in urban trees?
Craig Alexander: TD has been a champion of trees for a long time, as well as putting environmental considerations into policy decisions. If you want people to have high standard of living, they have to have a high quality of community life. The urban forest is actually making cities more livable.
ACTrees: What’s the value of this kind of economic or data-driven assessment of community trees?
Craig Alexander: Well, for example, Toronto had an ice storm last year and it cost millions of dollars to clean up the damage and tree canopy. If the city is spending money on this, you need to know you’re getting a good return on those taxpayer dollars.
When we added up all the benefits, and after talking to Toronto Parks, Forestry, and Recreation about what it costs to maintain the trees, on average it costs about $4.20 a year per tree, but the benefits you get from the trees is much greater.
For every dollar of maintenance, the trees are returning between $1.35 and $3.20 (a 220% return) in benefits. It’s a good investment. We aren’t including things we can’t measure like the intangibles of being able to go to a park and enjoy the trees. This is a low ball number because you can’t measure everything.
ACTrees: What’s the payoff when a city invests in its trees?
Craig Alexander: Urban trees alleviate infrastructure pressures related to water, air quality, energy savings, and reducing carbon in the environment. Trees also raise property values, which in turn raises property taxes. Trees have a lot of different impacts and cities get a bigger benefit than the cost. Let’s face it, trees are expensive. But we came to the conclusion that the trees in Toronto’s urban forest are worth an estimated $7 billion, or about $700 per-tree.
ACTrees: How might other cities use this report as a model?
Craig Alexander: You can do this calculation for any city. The trees, regardless of city, are providing the same benefits, but the dollar values will be different. I know for certain that based on cost benefits analysis, the benefits will out way costs for any city. Just how much will differ.
So for example, to figure out the calculations on energy savings from the cooling benefits of trees, you need to look at local energy costs to see how much is saved. While this cost is different from city to city, you can apply the same methodology to any jurisdiction if you know the size of the tree canopy and other input information. Obviously, a smaller canopy will have less benefit, and larger more benefit.
I strongly believe that the numbers for Toronto are indicative of the benefits that other cities get from their urban forests. And I’m confident the benefits far outweigh the costs. While there is an upfront cost for trees plus the cost to maintain trees, the benefit will far outweigh the cost.
ACTrees: What value can other corporations derive from following TD’s lead?
Craig Alexander: First, businesses have a corporate and social responsibility to be good citizens in their community, and as a consequence, businesses need to give back to the communities where they operate. You see lots of business doing this. It’s an important thing.
It’s also good for recruiting talent. People want to identify themselves with a business that identifies and connects to important things to the community. It improves your brand and how people perceive you, but it’s good for the company as well.
Second, my firm is in the business of providing financial services to Canadians and we provide a variety of services, including insurance and wealth management. At the end of day, if citizens are wealthier and happier, they will demand more financial services. We honestly think if Canadians are successful, we’ll be successful.
We also do this because we don’t have a lot of policy think tanks in Canada, and we can play this role. We take economics and apply it to nontraditional economic issues to raise awareness and improve perspective. It’s good for citizens, policymakers, brands, and businesses.
ACTrees: Do you have a personal “tree story” you’d like to share?
Craig Alexander: If anybody travels to Toronto and goes to the top of the CN Tower, you can look out over the city there and what you’ll see is a forest with sprouts of towers sticking out of it. When you’re physically on the ground, it is roads, sidewalks and businesses, but a lot of trees. When above the tree canopy, you are struck by how green it really is. I’ve taken clients from Hong Kong to the top of CN Tower and they are amazed by the forest in the city.
Craig Alexander is the Senior Vice President and Chief Economist for TD Bank Group. In that role, he manages a large team of economists that support all of the divisions and clients of TD–the second largest bank in Canada and the eighth largest bank in the United States. Craig has 15 years of experience in the private sector as an economic and financial forecaster. He is also a regular commentator on public policy. Prior to joining the private sector, Craig spent four years as an economist at Statistics Canada.
“Special Report: Urban Forests: The Value of Trees in the City of Toronto,” TD Economics
“Toronto’s urban forest worth $7-billion, report says,” Toronto Star
“Economists and poets agree – urban trees are priceless: Editorial,” The Globe and Mail
“Toronto’s trees worth $7B, TD Bank says,” CBC News