Indian dry ports (inland cargo-consolidation and distribution centres) are expected to play a pivotal role in connecting the North Indian heartland with the gateway seaports of Mundra, JNPT and Chennai. However, in this process, dry ports contribute considerably to the vexing problem of atmospheric pollution because of the ensuing road and rail transportation. There is a considerable body of research on the socially undesirable side effects of production, for instance in sectors such as manufacturing and transport. In spite of this, the standard methods so far employed in the analysis of port efficiency and productivity, notably data envelopment analysis (DEA), have failed to address and internalize the economic ramifications of transport externalities. In this article, a comparative study of the typical DEA models is undertaken, in an effort to illustrate the problem at hand. A new eco-DEA model is proposed that simultaneously evaluates both the undesirable and the desirable outputs of port service production. The model is applied to evaluate dry port efficiency, while taking into account the CO2emissions caused by the transport of containers from dry ports, located in the North Capital Region of India, to the various gateway (coastal) ports. The results reveal that efficiency evaluations are significantly altered once environmental aspects are factored in to the model. The methodology proposed here can be easily transferred to any other industrial sector where environmental concerns are becoming an issue.