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Taking into account the evolution of the Common Agricultural Policy (CAP), it is wondered to what extent the “green” transformation of this policy and the accompanying change in the distribution of direct payments between farms contributed to the elimination of disproportions in agricultural income. The aim of the study was to investigate the changes in the proclaimed concepts related to the development of the EU agricultural sector in terms of their “green” transformation, and to assess the impact of “green” CAP payments on income inequalities between farms. The research was conducted based on the data representative for Polish commercial farms for the years 2004–2019, covering three financial perspectives of the agricultural policy. The methods of counterfactual modelling and assessment of income inequality were used in the study. The analyses showed that the evolution of the CAP priorities, and hence instruments, towards the pro-environmental (or, more broadly, towards sustainability) have so far had a rather negative impact on the income of Polish farms. In its current form, the support dedicated to environmental and climate protection did not fully compensate farmers for income losses resulting from the use of pro-environmental agricultural practices. Moreover, “green” CAP payments did not play a significant role in shaping income inequalities. Therefore, we can conclude that the CAP instruments do not contribute sufficiently to sustainable development (economic, social, and environmental), because they do not support/motivate farmers to change their production standards.

“Green” Transformation of the Common Agricultural Policy and Its Impact on Farm Income Disparities