a b s t r a c tWe argue analytically that many commonly used models of pollution-generating technologies, which treat pollution as a freely disposable input or as a weakly disposable and nulljoint output, may generate unacceptable implications for the trade-offs among inputs, outputs, and pollution. We show that the correct trade-offs in production are best captured if a pollution-generating technology is modeled as an intersection of an intendedproduction technology of the firm and nature's residual-generation set. The former satisfies standard disposability properties, while the latter violates free (strong) disposability of pollution and pollution-causing inputs. As a result, the intersection-which we call a byproduction technology-violates standard free disposability of pollution and pollutioncausing inputs. Employing data envelopment analysis on an electric-power-plant database, we illustrate shortcomings, under by-production, of two popular efficiency indexes: the hyperbolic and directional-distance-function indexes. We propose and implement an alternative index with superior properties. Under by-production, most efficiency indexes decompose very naturally into intended-production and environmental efficiency indexes. This decomposition is difficult to find under alternative specifications of pollutiongenerating technologies.

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