The Inclusion of Ecosystem Service in Land Valuation and Impact on Cadastral Land Value – a Case Study

In the Czech Republic, a system of evaluated soil-ecological units (ESEU) is used for soil valuation, where the price is determined on the basis of production potential. In practice, the production potential of soil is also very important for spatial planning because it is used to determine the protection class of agricultural land with regard to the possibility of designating it for non-productive purposes. This paper focuses on the application of an econometric model to determine the effect on soil value in selected cadastral areas when the effect of the non-productive function of soil in the form of retention is taken into account. This is effectively an ecosystem service calculation, as only the production function is included in the ESEU price in the Czech Republic. For the purposes of the paper, three alternative scenarios are chosen in which the production price includes the price for the non-production function in the form of retention, in the amounts of 5%, 10% and 20%. The results show that even a 5% inclusion of soil retention has a significant impact on its price and, more precisely, on its value. The difference between the original value and the shadow value with the greatest effect of water retention at the 20% level is approximately CZK 12.3 million for the Ivančice site and approximately CZK 20.6 million for the Lysá nad Labem site, which indicates the importance of changing the current government methodology. The higher increase for the Ivančice site is due to the higher proportion of more productive ESEU and, at the same time, the higher retention capacity of the main soil units (MSU), which is absolutely necessary for the valuation of agricultural land in the main production areas of the Czech Republic. The results confirm that in these most valuable areas, the increased share of ecosystem components would lead to the greatest increase in the price of agricultural land, which can be considered as an adequate and meaningful result, if only in the context of comparing agricultural land prices between EU Member States. The water retention capacity of the soil is a qualitative indicator of the non-productive function of the soil and is increasingly supported as such.