With a sample of farms in the European Union (EU) and Farm Accountancy Data Network (FADN) data completed by additionally collected data, we illustrate how the effect of farm subsidies on technical efficiency changes when environmental outputs are incorporated in the calculation of technical efficiency. Results indicate that the effect of the Common Agricultural Policy (CAP) operational subsidies on farm technical efficiency changes when environmental outputs (namely greenhouse gas emissions, nitrogen balance and ecological focus areas) are taken into account in the efficiency calculation: some effects change significance, and more importantly, some effects change sign.