Orchard meadows, a traditional agroforestry system in Switzerland combining the dual use fruit and fodder production, are declining, even though the farmland managed under agri-environmental schemes (AES) has been expanding. Despite increasing interest in agroforestry research for developing sustainable agriculture, it is poorly understood how subsidies contribute to the maintenance of trees on agricultural land and the promotion of farmland biodiversity. Therefore, the objective of the present study is to examine the effects of incentive-based AES on both farmers’ decisions regarding trees and biodiversity by developing an ecological–economic assessment model. To explore cost-effective AES, we explicitly consider the heterogeneity of farm types. We apply this integrated model to the farms in Schwarzbubenland, a small hilly region in Northern Switzerland. Results show that the adoption of AES and the compliance costs of participating in AES considerably vary among farm types, and the current AES do not provide farmers with sufficient payments to maintain any type of orchard meadows, despite the ecological benefits of orchard meadows. The integrating modeling developed in this study enables us to better understand the relationship between subsidies and biodiversity through farmers’ decisions on land use and facilitates the design of cost-effective payments for the maintenance of agroforestry.