Valuation Approaches for Soil Carbon - Soil Carbon: Science, Management and Policy for Multiple Benefits - page 216

the risk of double counting, as soil carbon
represents only a single factor of production
in the provision of these services (Fu et al .,
2011; Johnston and Russell, 2011).
The production function approach,
however, provides a potential tool for dis-
entangling the contribution of soil carbon to
many directly valued ecosystem services.
The production function approach, or sim-
ply 'valuing the environment as input', is
used increasingly to value some key eco-
logical services, such as those arising from
the regulatory and supporting functions of
ecosystems (Barbier, 2007). In the context of
valuing soil carbon, production function
methods would use the input-output rela-
tionship of soil carbon to some market good
or service (Pearce and Moran, 1994). For ex-
ample, the value of soil carbon in nutrient
cycling in agricultural soils can be revealed
by estimating the impact that a change in
soil carbon has on agricultural yields, which
in turn are related to the market value of the
agricultural goods. The change in the mar-
ket value of agricultural goods (due to the
change in soil carbon in the land used to
produce those agricultural goods) provides
an estimate of the economic value of soil
carbon as a productive input in the provi-
sion of agricultural goods. This is essen-
tially a dose-response approach between
the soil carbon and a market commodity.
Valuing the ecosystem services related
to soil carbon using the production func-
tion approach requires two unique sources
of knowledge. First, knowledge on the eco-
logical processes, components and functions
related to soil carbon that generate useful
final services, and second, knowledge on the
way in which these services translate into
specific benefits for humans (Barbier, 2007).
The production function method can be dir-
ectly applied where only the producers of
the final market good benefit from changes
in the quantity of soil carbon (e.g. Hougner
et al ., 2006; Richmond et al ., 2007). In the
example above, quantification of a marginal
change in soil carbon on marginal changes
to agricultural productivity would provide
knowledge of the functional relations be-
tween soil carbon and a directly consumed
market good (agricultural production). The

human welfare benefits of the soil carbon-
agricultural productivity production func-
tion can then be related to the market prices
of the market good produced. If the market
price of the agricultural goods to consumers
is unchanged by the marginal change in soil
carbon, then the benefits of that marginal
change can be estimated from changes in
producer surplus resulting from increased
income due to increased productivity. Here,
it should be noted that, if the change in soil
nutrients changes market prices, it becomes
much more difficult to estimate benefits.
When the final goods or services to which
soil carbon is a factor of production do not
have explicit market prices (as may be the
case with water-quality regulation and flood
protection), then other valuation methods,
such as replacement cost methods, averted
behaviour methods or stated preference
methods, may be used to value the changes
of those goods or services.
One particular problem with the pro-
duction function approach is the generaliz-
ability of production functions that relate
soil carbon to some valued final good or ser-
vice. Production functions models generated
in a particular social-ecological context may
not represent accurately the same relations
in other contexts. For example, soil types,
climatic conditions and landscape typology
all influence the relation between soil carbon
content and erosion control. Moreover, the
value of that erosion control depends critic-
ally on the number of individuals and their
willingness (or ability) to pay for that ser-
vice. Considerable caution is therefore re-
quired in transferring the benefits accruing
from soil carbon in one location to other
contexts. It may be argued that the lack of
generalizable production functions for soil
carbon-ecosystem services relations limits
the application for large-scale analyses.

Valuation of the Role of Soil Carbon
and Climate Regulation

For climate regulation, sequestration of at-
mospheric CO 2 as soil carbon can be concep-
tualized as 'producing' lower concentrations
of CO 2 in the atmosphere, thus reducing the