Valuation Approaches for Soil Carbon - Soil Carbon: Science, Management and Policy for Multiple Benefits - page 217

damage to humans via anthropocentric cli-
mate change. Putting aside the issues of gen-
eralization previously discussed, then the
'ecological knowledge' required to relate the
ecological function (accumulation of soil
carbon) to the valued service (climate change
mitigation) is relatively simple; that is, the
accumulation rate of soil carbon and the re-
lationship between sequestered carbon and
atmospheric CO 2 (a simple conversion factor
of 3.67 from carbon to CO 2 ). However, esti-
mating the welfare effects of such carbon
sequestration is problematic. The two major
approaches to valuing the costs and bene-
fits of soil carbon as a climate regulation
service include estimating the social cost of
carbon and the use of marginal abatement
costs curves.
The social cost of carbon (SCC), or
shadow price approach, seeks to estimate
the full effect on social welfare of reducing
the emission of carbon by an additional unit
(typically a tonne) over the lifetime of that
unit of carbon in the atmosphere (Pearce,
2003). Most SCC estimates utilize an inter-
temporal optimization framework; that is,
their primary objective is to calculate so-
cially optimum levels of emissions through
time. The SCC is then defined as the emis-
sions tax required to keep emissions at the
optimal level. If global greenhouse gas emis-
sions do not follow the optimal emissions
path assumed by the model, then the esti-
mated SCC will be incorrect (Clarkson and
Deyes, 2002).
Here, we see that the SCC approach to
valuing the climate regulating services of soil
carbon is endogenous to assumed carbon emis-
sions trajectories. The marginal social welfare
benefits of sequestering atmospheric CO 2 as
soil carbon depends on the total atmospheric
concentration of atmospheric CO 2 and global
emissions trajectories. The marginal dam-
age of a unit of a CO 2 emissions depends not
only on the atmospheric greenhouse gas
concentration at the time of emission but
also on the amount of greenhouse gas emis-
sions discharged over the atmospheric life-
time of the gas - approximately 100 years in
the case of CO 2 (Clarkson and Deyes, 2002).
The greater the predicted CO 2 concentra-
tions, the greater is the marginal effect on the

social welfare benefits of sequestering any
additional units of CO 2 in soils.
The exact shape of the damage cost
function is dependent on the assumptions
regarding the relations between atmos-
pheric concentrations of greenhouse gases
and their actual impacts on various aspects
of human well-being. Given their future fa-
cing nature, these damage cost functions
tend not to be well justified empirically. For
instance, when trying to value the impacts
of climate change, uncertainties arise when
(i) assessing non-market impacts (such as
decreased life expectancy), (ii) decisions on
how damage estimates should be aggre-
gated with regard to income inequality and
(iii) determination of the 'correct' discount
rate to be applied to future impacts (e.g.
Downing et al ., 2005; Ekins, 2007). A fur-
ther source of uncertainty with the SCC ap-
proach relates to the difficulty in estimating
future global emissions trajectories. Together,
these sources explain the extreme ranges of
SCC estimates found in the literature. For
example, Tol (2009), in a meta-analysis of
47 studies ( 232 estimates), reported a mean
SCC of €49 t − 1 CO 2 and a 95th percentile cost
of €185 t - 1 CO 2 (with a considerable right
skew to the distribution).
Alternatively, the marginal abatement
cost curve (MACC) approach is based on the
marginal cost of reducing carbon emissions
by one unit, where a MACC represents the
relationship between the cost-effectiveness
of different abatement options and the total
amount of CO 2 abated (DECC, 2009; Bockel
et al ., 2012). There are a wide range of pos-
sible technical solutions to increasing soil
carbon as a means of abating CO 2 emissions,
yet it is not immediately apparent which
options deliver the most economically effi-
cient reductions in atmospheric concentra-
tions of CO 2 . The MACC approach was de-
veloped to facilitate the comparison of the
cost-effectiveness of different mitigation op-
tions (Bockel et al ., 2012). There are two ways
of generating MACCs: economy-orientated
top-down models based on a macroeco-
nomic general equilibrium model, providing
overall cost to the economy; and engineering-
orientated bottom-up models that build
MACCs based on the abatement potential