While acknowledging that the sector protects water sources and crop pollination, controls diseases and enhances biodiversity, it concludes that agriculture is still the largest emitter of greenhouse gases and primary cause of river pollution due to nutrients and pesticides.
And these impacts could increase under the Government's Food Wise 2025 strategy, which targets a 65pc increase in farm output, albeit with 70 action points to maintain agricultural sustainability.
The latest projections suggest that emissions will rise by 6pc between 2014 and 2020 due to Food Wise 2025 and expansion of the dairy herd, even with "optimum deployment" of measures to reduce emissions.
The EPA added this is at a time when Ireland is "struggling" to meet 2020 and 2030 emission reduction targets, and it also warns that output cannot be ramped-up across all areas.
"Achieving the aims of Food Wise 2025 without damaging the environment upon which agriculture depends will be a significant challenge," it says.
"It is clear that the health of both our soils and our agriculture sector are intrinsically linked and dependent on one another. From an environmental perspective, some areas are more suitable than others for intensification," it says, adding that "more vulnerable areas" will require "careful protection". It says that drier, more productive soils in the south east, combined with lower rainfall and a longer growing season, provide a "better platform" for high-output systems compared with the north-west which has more rainfall and a shorter growing season.
It also says that farmers will have to adapt to climate change, as it will impact on them "more directly" than other sectors of society.
Almost 140,000 farms of various sizes manage almost 68pc of national land cover, with primary production accounting for €4.1bn and another €8.5bn coming from the manufacture of food and drink. But many are struggling.
"The report of the Agri-Taxation Working Group estimated that of the largest 79,000 farms in the country, just over one-third are economically viable, one-third are sustainable, but only because of off-farm income, and one-third are vulnerable in that farming is not sufficient to make the farms economically viable and off-farm employment is not locally available," the report says. It adds that a "substantial percentage" of direct payments go into sustaining farm enterprises as farmers suffer from "significant ongoing volatility" in the price of agricultural commodities.
"We need policies to promote the right farming in the right place," it says. "Planned growth cannot be uniform across the country, and regional and local factors need to determine where intensification will take place. This will require a more location-specific and prioritised actions to address the pressure agriculture places on the environment."
The report concludes that more research is needed on the sustainability of increased output, and that building trust between environmental and agricultural stakeholders was a "major challenge".
This will need to be developed to ensure economic competitiveness and environmental sustainability, it adds.