The aim of this paper is to analyse the cost-effectiveness of payments to organic farms in Luxemburg from an agri-environmental perspective. For pursuing this aim, farm accountancy data, farm structure data and 7 environmental indicators were assessed for 12 organic and 12 conventional dairy and suckler-cow farms. Results show that organic farms cause substantially lower environmental impacts than their conventional counterparts. However, these additional environmental benefits do not go along with higher public payments. Therefore, we argue that agricultural policy in Luxemburg currently does not provide incentives for ecological friendly agricultural production in a sufficiently targeted way
