Valuation Approaches for Soil Carbon - Soil Carbon: Science, Management and Policy for Multiple Benefits - page 219

values are 'relative', as they are associated
with how people assign weights to goods
and services that affect their well-being.
Such approach lends itself to benefit-cost
analysis (Wegner and Pascual, 2011). De-
parting from individual preference-based
methods, alternative valuation approaches
can be based on participatory valuation. In
practice, three main alternative approaches
can be explored in terms of their advantages
and disadvantages when including eco-
nomic values in decision-making processes:
cost-benefit analysis (CBA), cost-effectiveness
analysis (CEA) and participatory multi-
criteria analysis (MCA) The first approach
puts all of its emphasis on economic effi-
ciency, while the second relates economic
efficiency to clearly defined normative goals.
The third approach has a broader scope in
terms of different socio-economic criteria on
which decisions are to be made, such as the
distribution of resources. All three approaches
can be applied in the context of evaluating
soil carbon projects.
There is a burgeoning literature ex-
plaining the use of monetary valuation to be
integrated in CBA and its merits and draw-
backs, both at the technical level as well as
from a more philosophical stance (Kelman,
1981; Pearce, 1998). CBA is being used in-
creasingly to evaluate projects and policies
that consider ecosystem services to guide
the selection of projects that deliver max-
imum net benefits from the flow of ecosys-
tem services to society (Daily et al ., 2009;
Wegner and Pascual, 2011).
CBA is an economic evaluation tool that
characterizes a person as a self-interested
individual who attaches value to entities
only if it benefits his or her own welfare, and
who is a rational decision maker of consist-
ent choices towards maximizing his or her
personal welfare. An individual's welfare is
then measured by the satisfaction of per-
sonal preferences. In the context of soil car-
bon projects and policies, CBA focuses on
aggregating individuals' willingness to pay
(with a 'one person one vote' libertarian
view) and monetarily quantifying the wel-
fare impacts on society (Pearce et al ., 2006).
The ranking of policy alternatives is based
on the net present value (NPV) approach,

and the one with the highest NPV is selected
as it is assumed to bring about the largest in-
crease in social welfare.
Individual preferences are revealed
through market-related choices, such as us-
ing the production function approach (see
above) or, when such markets do not exist,
through the recreation of hypothetical or
pseudo-markets (through stated preference
methods, as explained earlier in the chap-
ter). This approach contains some implicit
normative choices when reducing the value
dimension to preference utilitarianism, and
it categorizes concepts such as freedom by
individuals' ability in the marketplace to
satisfy individual preferences (Niemeyer
and Spash, 2001; Nyborg, 2012).
A key challenge of using CBA is that if
different people order preferences according
to different rules, the aggregation of all pref-
erences on a single scale may not be feasible
(Nyborg, 2000). In view of this limitation,
deliberative approaches can be used, espe-
cially when the problems of dealing with
continuous change, irreversibility, uncer-
tainty and multiple legitimate standpoints
in society are thought of as being irreducible
(van den Hove, 2000), and when individual
preferences may not be held in advance,
needing to be discovered or elicited. This
implies the need for values to be socially
constructed through some form of delibera-
tive communication (Dryzek, 2000). In the
realm of environmental valuation, Howarth
and Wilson (2006) note that by effective
group procedures it is possible to enable par-
ticipants to access relevant information,
share their perspectives and engage in col-
lective thinking in order to make better in-
formed and articulated group choices than by
aggregating individual preferences, as done in
CBA.
One strand of participatory valuation is
based on multi-criteria assessment methods
to assess the value of soil carbon in terms of
multiple socio-economic objectives. Amidst
the multiple approaches in multi-criteria
evaluation, social multi-criteria evaluation
(SMCE) approaches are being developed to
integrate conflicted values in society through
the 'orchestration' of non-equivalent repre-
sentations of diverse scientific disciplines