Quantifying the opportunity costs of nature-inclusive agriculture in the Netherlands

CONTEXT Although nature-inclusive agriculture (NIA) has gained attention in Dutch policy, its adoption in dairy systems remains limited due to economic trade-offs. This challenge arises against a backdrop of farm intensification and increasingly stringent environmental regulations that restrict further expansion. OBJECTIVE This paper quantifies the economic trade-offs of adopting NIA practices by estimating their opportunity costs. Assessing the variability in opportunity costs among farms is also policy-relevant, as it highlights which farms face higher economic barriers and informs where targeted support or compensation may be necessary. METHODS We employed an empirical bio-economic model with 407 predefined farm plans from the 2018 Dutch Farm Accountancy Data Network (FADN). For each farm, we determined the income-maximizing farm plan and then used the shadow price from a re-optimized farm plan as a proxy for the opportunity cost of each NIA practice. To assess how structural and policy-related factors shape these costs, we examined four scenarios representing different levels of managerial flexibility. RESULTS AND CONCLUSION Opportunity costs of NIA adoption vary substantially across farms and practices. More extensive strategies can achieve higher levels of adoption but often come with higher costs. Sunk costs and capital lock-in significantly limit farmers' flexibility to adapt their systems. Long-term adoption of NIA practices requires not only financial compensation but also attention to structural, institutional, and behavioural factors. SIGNIFICANCE This study provides a basis for designing more efficient, differentiated, and farm-specific compensation schemes. It also highlights the need for broader public support to fairly reward farmers for providing both agricultural goods and ecosystem services. The findings offers new insights to inform policy design for balancing agricultural productivity and environmental sustainability in European farming systems.