This study offers a novel empirical application for assessing the impact of agri-environment schemes (AES) on the performance of farms. The existing evidence about the environmental and economic impact of these schemes is still limited. Therefore, our objective is to contribute to the literature on the impact evaluation of AES by considering three important aspects in our empirical analysis. First, the performance of farms is proxied by an indicator that incorporates environmental externalities into production activities. Second, our empirical analysis focuses on a sample of Bavarian dairy farms covering the period 2013-2018, thus, we can evaluate the effectiveness of Europe’s agri-environmental schemes during the latest programming period. Finally, in an effort to increase robustness, we employ an improved version of the MalmquistLuenberger productivity index, which enables us to get around some of the shortcomings of the original index. The obtained results suggest that agri-environment payments have a limited effect on improving farm-level green productivity.