Vincent de Leijster

68 Chapter 4 price was estimated based on the Spanish almond market price fluctuation (FAOSTAT, 2018) between 2012 and 2017 (for all treatments we assumed st.dev=€1.30). The standard deviation of maintenance costs was assumed to be 10% of the maintenance costs of the specific treatment. We executed a sensitivity analysis for discount rate by modelling four alternative discount rate scenarios besides the baseline discount scenario of 5%. We simulated NPV, IRR and DPBT in the stochastic model at discount rates 25% lower ( r =3.75%), 15% lower ( r =4.25%), 15% higher ( r =5.75%) and 25% higher ( r =6.25%). 4.2.4 Data analysis: Compensating opportunity costs and internalizing costs We explored incentive-based policy options to compensate for the opportunity costs by price premiums and public greening payments, and to internalize environmental externality costs through payment for environmental services. In the following, adjustments that were applied to the economic model to simulate the incentive-based policy options are discussed. 4.2.4.1 Public and private policy incentives to compensate for opportunity costs We simulated the effects of public and private policy incentives on the NPV values of the treatments. First, for private incentives we assessed the amount of price premium, above regular market price, that would be required in order to compensate for opportunity costs. Therefore, value for market price was varied in the stochastic model in order to reconstruct a range of possible outcomes. These outcomes were used on a linear regression (using R-studio version 1.2.5019, package ‘lme4’) between price premium value and NPV, which was then used to find the breakeven point with conventional tillage. Price premiums were expressed in € ha -1 y -1 by multiplying the value that was added to the market price by the treatment-specific production per ha and to the number of productive years divided by the full lifetime of the project, 30 years. Second, for public incentives we calculated the additional public greening payment that would be necessary to compensate for opportunity costs. Therefore, we added additional income from a hypothetical greening payment that can be made available by governments to promote sustainable practices, which is for example also given by European Union’s Common Agricultural Policy (CAP) to promote other types of green measures in agricultural landscapes (Pillar 2; Matthews, 2013). This income source was also varied to construct a linear regression between public greening payment and the treatments NPV. Finally, we