Airborne electromagnetic (AEM) surveys may be used to provide environmental subsurface assessments. Trial fixed-wing AEM surveys were conducted in the central English Midlands for such purposes. This paper investigates a specific issue, that of the canopy effect, which needs to be addressed when high-resolution AEM data are to be interpreted accurately. Any elevated feature (typically tree cover) that gives rise to underestimated altimeter readings causes the canopy effect. Half-space models obtained from conventional, half-space procedures together with formal numerical inversion techniques form the basis of the study. Both theory and survey data are used to assess the significance of the canopy thickness on the resistivity models. The pseudolayer half-space method has a stated immunity to altitude errors. The method is found to be highly effective in returning resistivity estimates unbiased by altimeter errors. The associated positive apparent depths provide realistic estimates of canopy thickness while, elsewhere, negative values may be returned. Published numerical inversion schemes do not discuss any corresponding requirement to reduce canopy effect bias. Underestimated altitude measurements introduce false high-resistivity zones with high wavenumber content unless an equivalent pseudolayer concept is used. The study indicates a requirement for a formal pseudolayer (an at-surface perfect resistor of variable depth) to be included in the model when canopy zones are present.