Animal welfare (AWW) is becoming a key issue in the policy of the European Union (EU). With the simultaneous dynamic intensification and concentration of animal production, the EU is attempting to strengthen the level of AWW as a factor that has a fundamental impact on the profitability of farms, the quality of life in rural areas and the state of public health, and in particular on aspects related to environmental and climate protection. AWW, in accordance with the “From Farm to Fork” Strategy, which is part of the European Green Deal, is an important element in the transformation of the EU's agricultural economy towards a fair, healthy and environmentally friendly food system. It is also the subject of increasing interest from the public opinion in the EU, expecting a constant increase in the protection and welfare of farm animals. In this regard, it is worth summarizing the current political and legal achievements of the EU regarding AWW, and above all the impact of financing animal production under the Common Agricultural Policy (CAP) and funds directed to improve AWW. The EU's policy initiatives to improve the welfare of farm animals also require assessment, especially those related to redirecting legislative actions to strengthening market motivations that include raising the standards of breeding, raising, transporting and slaughtering farm animals. A review of literature and official EU documents and legal acts leads to the conclusion that both the legal standards establishing the protection of farm animals and the method of financing animal production contribute to the conflict between economic needs and social and environmental-climatic needs in the EU. This is a challenge facing the European Union and will require deep, systemic changes that would support the achievement of sustainability in animal production, while enabling real improvement of the DZG.