Fallowing with green fertilizer can benefit agricultural ecosystem services (AES). Farmers in Taiwan do not implement fallow practices and plant green fertilizer because the current subsidy level (46,000 NTperha)istoolowtomanagefallowing.Thispaperdefinestheobjectiveofgovernmentagriculturepolicyorthefarmer’sobjectiveasmaximizationoffarmproductivity,approximatedtothevalueofsocialwelfareandAES.Farms,whichdonotfollowproperfallowingpractices,oftenhavepoorlymaintainedfallowlandorleftfarmlandabandoned.Thisresultsinnegativeenvironmentalconsequencessuchascutworminfestationsinabandonedland,whichinturncanaffectcropsinadjacentfarmlands.Theobjectivesofthisstudyaretwofold.First,itdeterminestheproperfallowingsubsidybasedontheconceptofpaymentforecosystemservicestoenticemorefarmerstoparticipateinfallowing.Second,itsimulatesthebenefitofplantinggreenmanureinfallowlandtothesupplyofAESbasedontherateoffarmerswhoarewillingtoparticipateinfallowlandpracticesandessentialparametersthatcanaffectsoilfertilitychange.Theapproachinvolvesaseriesofinterviewsandadevelopedempiricalmodel.ThevalueofAESwhentherateoffarmerparticipationis100perha)istoolowtomanagefallowingThispaperdefinestheobjectiveofgovernmentagriculturepolicyorthefarmer’sobjectiveasmaximizationoffarmproductivityapproximatedtothevalueofsocialwelfareandAESFarmswhichdonotfollowproperfallowingpracticesoftenhavepoorlymaintainedfallowlandorleftfarmlandabandonedThisresultsinnegativeenvironmentalconsequencessuchascutworminfestationsinabandonedlandwhichinturncanaffectcropsinadjacentfarmlandsTheobjectivesofthisstudyaretwofoldFirstitdeterminestheproperfallowingsubsidybasedontheconceptofpaymentforecosystemservicestoenticemorefarmerstoparticipateinfallowingSeconditsimulatesthebenefitofplantinggreenmanureinfallowlandtothesupplyofAESbasedontherateoffarmerswhoarewillingtoparticipateinfallowlandpracticesandessentialparametersthatcanaffectsoilfertilitychangeTheapproachinvolvesaseriesofinterviewsandadevelopedempiricalmodelThevalueofAESwhentherateoffarmerparticipationis100 ) over the value at the current participation rate of 14%. This study further concludes that the appropriate fallowing subsidy has a large positive impact on AES and social welfare (e.g., benefit from food and biofuel supplies) and is seen as a basis of ecological governance for sustainable agro-ecosystems