This work presents a study on combustion of oil palm shells in a conical fluidized-bed combustor. Alumina sand of 300-500 μm particle sizes was used as the bed material to prevent bed agglomeration. Prior to combustion experiments, a thermogravimetric analysis was performed to investigate thermal and combustion reactivity of the selected biomass. During the combustion tests, oil palm shells with the mean particle size of 1.5 mm, 4.5 mm, 7.5 mm, and 10.5 mm were burned in the combustor at a 45 kg/h feed rate, with excess air within 20-80%. Temperature and gas concentrations (O2, CO, CxHy, and NO) were recorded along the axial direction in the reactor as well as at stack. As revealed by experimental results, biomass particle size and excess air had substantial effects on formation and decomposition of gaseous pollutants (CO, CxHy, and NO) inside the reactor, as well as on combustion efficiency and emissions of the combustor. The CO and CxHy emissions were effectively controlled by decreasing biomass particle size and/or increasing excess air, whereas the emission of NO showed the trend to be diminished with coarser biomass particles and/or lower excess air. A cost-based approach was applied to determine optimal values of biomass particle size and excess air ensuring the minimum emission (or "external") costs of burning the shells in the proposed combustion technique. From the optimization analysis, the best combustion and emission performance of the conical fluidized-bed combustor can be achieved by using oil palm shells with the particle size of about 5 mm, and maintaining excess air at 40-50%. Under these conditions, the combustor can be operated with high (99.4-99.7%) combustion efficiency, while controlling the gaseous emissions at acceptable levels. No evidence of bed agglomeration was found in this conical fluidized-bed combustor using alumina as the bed material for the entire time period of experimental tests.