Peat soils that are drained to enable productive agriculture result in land subsidence and greenhouse gas (GHG) emissions. These have negative effects on the environment, in particular climate change, and rural infrastructure. This article reviews the EU and Dutch regulatory requirements for reducing GHG emissions and discusses options to reduce the negative effects of peat soils. An optimisation farm model based on Dutch farm data provides estimates of farm income losses for three different changes in water levels in peat soils associated with changes in production methods for three options of NH3 emission reductions and three options for nature conservation areas. Model results suggest that carbon credits are an excellent method of financing the costs that farmers face when adapting to legal requirements for lower emissions, ideally raising water levels to –20 cm below field level. The comparison of scenario results also outlines the need to take account of different policy objectives simultaneously in policy evaluation, as do farmers when they adapt their farm practices to the policy environment. Opportunities to add value from markets could also help reduce the income loss from the adoption of more environmentally-friendly practices.