Understanding the value of Scotland’s agricultural soil natural capital

Challenges

Assessments of natural capital typically focus on ecosystem services outcomes, or the extent and condition of habitat types. This reflects the availability of observed data. Habitats or ecosystem services may be the appropriate focus from the perspective of policy and management, where multiple assets combine and are indivisible from ecosystem processes. However, for other assets, a focus at habitat level may be an omission that results in sub-optimal policy or management.

The debate could also be framed in terms of the degree to which it is appropriate or possible to reduce ecosystems from intact systems to component parts. For habitats such as peatland, the extent and condition of the soil plays a more readily observable role in the supply of some ecosystem services. Conversely, other services are related to the broader peatland habitat. For other habitats and land uses, the degree of human management and the interaction with other capitals means that the role of natural capital in service supply is less apparent. Furthermore, intensive management of land such as arable effectively reduces natural capital assets to their component parts. There is also a greater degree of input from man-made capital in more intensive systems. Across the wider agricultural sector there will be a spectrum of management where broader habitat functions beyond soil as a growing medium are utilised to a greater or lesser extent.

The Office for National Statistics’ Natural Capital Accounts for Scotland currently use a resource rent approach to determine the contribution of natural capital assets to the production of agricultural biomass (crops, animal fodder and grazing). This approach has the benefit of linking the flow of the final ecosystem service to the underlying natural capital assets using a valuation approach consistent with national accounting practice. However, it has drawbacks, for example, values reflect prevailing market prices driven by demand and supply in wider commodity markets and are subject to fluctuation regardless of the state of the underlying natural capital asset.

NatureScot’s Natural Capital Asset Index (NCAI) does not include valuation. Instead, it combines data on habitat extent with condition indicators to estimate trends in the flow of ecosystem services. Whereas the ONS accounts focus on the ecosystem services and the NCAI focuses on habitats, neither specifically considers the state of soil as the underlying natural capital asset. The existing literature on the value of agricultural soils has tended to focus on the ecosystem damages caused by management. Consequently, the benefits provided by soils, although implicit in the value of agricultural output, remain a gap. Natural capital assessments and metrics are often only indirectly linked to the underlying natural capital assets. This means the sustainability of natural capital use cannot be observed and there is a need to identify and better account for the extent and condition of the natural capital assets underpinning important ecosystem services.

Questions

Solutions

This project aims to identify the underpinning natural capital assets for key ecosystem services produced by agricultural soils, the appropriate biophysical metrics, and indicators to measure the extent and condition of agricultural soils and determine and apply the appropriate valuation methods to agricultural soils.

Farm systems natural capital logic chains

We are developing logic chains for ecosystem services delivered by the natural capital assets associated with different farming systems. The distinction between systems focuses on management (for example, tillage, rotations) rather than habitat types (arable vs. pasture). The logic chain approach identifies the natural capital assets appropriate for different agricultural production systems, the resulting ecosystem services, and the nature of the values that these then produce. We aim to identify systems where soil is a distinct natural capital asset, and specifically what properties of soil (organic matter, structure, chemical condition) contribute to each ecosystem service. This allows us to identify what constitutes a healthy soil, and what indicators may be appropriate.

Evaluation of soil health indicators

We are assessing soil health indicators against the ecosystem services identified to short-list suitable indicators for natural capita, including identifying baselines and trends. Soil health will mean different things to different users depending on their priorities: the underpinning of soil fertility and yield, biodiversity, climate change mitigation and adaptation, an indicator of land value (and as a condition for farm tenancies), and a broad indicator of national sustainability. The output of the indicator evaluation will be a list of soil health indicators linked to systems and ecosystem services that can be used to inform metrics such as the Natural Capital Asset Index and form the basis for soil natural capital valuation.

Estimating the values of soil natural capital

Based on the identified soil ecosystem services and soil health indicator, we are developing and applying appropriate valuation approaches for these services to estimate the values provided by soil natural capital. This considers the extent to which services can be individually valued, or whether joint valuation of service ‘bundles’ is more appropriate and determines the contribution of soil condition to agricultural biomass production, addressing the gap in the ONS Natural Capital Accounts.

Mapping soil natural capital service and values

We are combining our findings on soil health indicators and ecosystem service values to derive maps of soil natural capital indicators and values. These will illustrate where there is current coverage of soil health indicators, where ecosystem services are supplied and where those services are demanded. We aim to identify where the benefits of soil related ecosystem services are currently delivered, and where changes in farm systems could enhance both the natural capital asset in terms of private benefits to farmers and public co-benefits. Gaps in soil health indicator coverage are being identified to suggest where data gathering could be targeted.