A cost-based method for determining an optimal value of excess air ensuring efficient firing of fuel oil/gas in boilers with minimized environmental impact, is discussed. As the criterion for optimization, the total sum of “internal” costs (associated with the boiler fuel consumption) and “external” costs (or costs of damage done to the environment and humans by the gaseous pollutants from the particular boiler), is required to be minimum. The rates of the NOx and SOx boiler emissions are estimated based on the models considering the boiler furnace as a control volume, and the predicted results are compared with the values obtained in experimental tests with varying excess air. The optimization technique is applied to the 310 MW utility boiler fired with fuel oil. For boiler loads of 80 to 100%, the optimal excess air ratios were found to be less than specified excess air maintained in the actual boiler operation. Fuel oil firing at the optimal excess air ensures a significant benefit per unit boiler per year.