This paper discusses and empirically analyzes the implications of efficiency and innovation offsets for the management of non-point source pollution from agriculture. If efficiency improvements and green innovation indeed combine environmental advantages with economic advantages, these offsets would offer a free lunch adjustment to environmental regulations. A theoretical model of the farm is developed where pollution is a joint output of production, where inefficiency in production prevails and environmental innovations are available. We discuss whether education about environmentally friendlier farming practices is effective in such a context. The empirical analysis addresses pesticide use in conventional and genetically modified cotton production in North Carolina, USA. The conceptual model was implemented by means of the non-parametric directional distance function approach (Data Envelopment Analysis, DEA).