The problem is that Y trees we use now are treated differently (as objects) by Kunos SDK when we export the track.
We import them as plenty of objects and are exported as individual optimized body of trees using the naming convention.
But it is entirely possible today to have 3D trees that becomes 2D trees with various LOD if we don't use kunos optimized batching by naming them like any other tree.
It's completely possible to do it for trees next to the road. Just not optimized.
That being said.
Having 3D trees bring a **** tone of other problems that just the LOD (but LOD brutal transition is part of it), especially aliasing and foliage covering problems.
If you look at footage of GT sport and Forza 7, it gives you a very good idea of the pro & cons.
3D trees in GT Sport gives a better volume sensation end it's easier for them to follow light direction, but the LOD transition are jarring and the resolve of alpha covering becomes muddy at close distance. Forza 7 (and AC) Y trees have far better consistency of rendering quality with distance since it just one texture mostly vertical nicely filtered in the distance, but lack the sense of volume and are a pain to light correctly.
Even when you look at the State of the Art last trailer of Forza Horizon 5, you can noticed very well the LOD changes
8 seconds · Clipped by ac fastfab · Original video "Forza Horizon 5 Official Gameplay Demo - Xbox & Bethesda Games Showcase 2021" by Forza
youtube.com
After tinkered a bit with it, I don't thing that 3D trees looks necessary better for a Simulation right now, where visual consistency from distance is king. Most Y tree that looks bad right now is because they could have better textures (and better exported with kaiser filtering for mipmaps for exemple) and better tweak values on the shader.
I'm not saying 3D trees are not what we should aim at. It definitly is, but not sure right now that they would look better in most situation we have in an AC race.