<p>The purpose of this paper is twofold: In the theoretical part, we first introduced a novel disposability-based benchmarking model to assess the performance of decision-making units in the presence of undesirable products along with the benchmark points corresponding to inefficient firms. Our purpose in the application part of this research is to apply the proposed theoretical foundations to evaluate the performance and productivity changes of 26 Iranian power plants. In this contribution, directional weak disposability assumption is developed to control downscaling the activity level to reduce undesirable outputs in the framework of DEA. In the following, we combined weak and managerial disposability assumptions into a single technology set, which enables decision-makers to simultaneously downscale the activity level and utilize a new-generation technology by a managerial effort and expending costs to renew and upgrade the system. In the application section, it is shown that, overall, there must be a 28% more investment in high-quality coal with lower emissions and/or an engineering effort to utilize a new-generation technology in Iranian power plants to reduce undesirable outputs.</p>