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Grassland degradation not only results in soil degradation and severe decreases in land productivity, but also can promote the emission of soil carbon and nitrogen compounds as greenhouse gases into the atmosphere. The primary objective of this study was to characterize the impact of grassland degradation on carbon and nitrogen budgets in Inner Mongolia, China. We investigated the changes of total carbon, organic carbon, inorganic carbon and total nitrogen that occur in a grassland ecosystem (including vegetation and top 30 cm soil layer) in the course of grassland degradation. Total carbon stored in the grassland ecosystem was reduced by up to 14%, depending on the severity of the degradation. Total nitrogen storage was reduced by almost 10% under severe degradation, but was slightly increased at light and intermediate degradation, indicating that grazing exclusion would not lead to an increase in nitrogen storage in the ecosystem. Over 98% of the total carbon and nitrogen stored in the grassland ecosystem was bound in the soil which provides the dominant and most stable carbon and nitrogen pool in the ecosystem. Most of the soil carbon and nitrogen storage was present in soil water-stable aggregates and was released as soil water-stable aggregates break in the course of grassland degradation. In conclusion, the carbon sequestration capacity of the vegetation decreased significantly, and substantial proportions of soil carbon and nitrogen were lost in the course of grassland degradation, resulting in unbalanced carbon and nitrogen budgets. Strategies to restore degraded grassland must be designed to increase the carbon and nitrogen storage potential of grassland ecosystems.
