Vincent de Leijster

16 Chapter 1 superior quality, higher prices can be charged, and by delivering services that benefit society, compensation may be received. However, these elements also depend on external factors, such as the presence of markets and the willingness to pay more for better quality. We refer to these external economic factors as incentives. Incentives may either be public-based instruments (such as subsidies) or market-based instruments (such as price premiums or payments for ecosystem services) (Robbins et al., 2015). Incentives can be paid on a land-unit basis, as a premiumon top of themarket price, or as compensation for a service that is delivered. The production of food often involves environmental externalities that are not marketed. If alternative management that reduces externalities is less profitable, then we refer to the difference in net revenues as opportunity costs. Incentives are often provided to compensate these opportunity costs. For example, organic management may result in lower production since biological inputs may be less effective in fertilizing and controlling pests than chemical inputs, and therefore an organic certificate provides a price premium on top of the market price (Sgroi et al., 2015; Testa et al., 2015; Verburg et al., 2019). Providing subsidies for greening measures is a public-based incentive that may be paid when natural vegetation strips are planted on the farm (Vanni et al., 2013). If the goods or services produced on a farm are not marketed and not compensated by incentives, then we call this non-marketed value shadow prices, meaning that value is generated but no monetary valuation is provided for it. Landowners or practitioners can only benefit from these incentives if the entity that provides them is locally present. For example, farmers may diversify the number of products that they produce on their farm, but if there is no local market for the newly produced items, then the farmer cannot receive monetary value for them (Bowman & Zilberman, 2013). Similarly, payment for ecosystem services is still highly underdeveloped in most regions, which makes it difficult for farmers to market the services that they provide, such as carbon sequestration or erosion control (Galati et al., 2015; Kurkalova et al., 2004). External incentives diversify the income sources of farmers, and this makes them less economically vulnerable to the volatile market prices of their main crop (Robbins et al., 2015). We need to understand better whether transitions from conventional to agroecological management result in opportunity costs, and which public or private incentives can effectively compensate for these potential – temporal – opportunity costs (Kurkalova et al., 2004; Luo et al., 2014). 1.4 Agroecological transition model The ‘International Assessment of Agricultural Knowledge, Science and Technology for Development’ (IAASTD) has proposed a transition model for sustainable development in