An energy-supply model for industrial districts located near urban areas has been developed by using the energy-supply model package EFOM-ENV/GAMS. The model produces cost-optimized emission-reduction strategies and energy-supply structures for industrial districts by allowing for the energy demands of the district as well as nearby urban areas. Our case studies refer to an industrial district near Izmir, Turkey. We find that SO2 reductions are best achieved by proper selections of fuels and combustion technologies. On the other hand, NOx reductions require the use of abatement technologies along with proper selections of fuels and combustion technologies. Cogeneration plants are generally preferred. (C) 1999 Elsevier Science Ltd. All rights reserved.