This book develops methodologies to model economic activities and their links to the environment and vice versa. It also attempts to develop an environmental policy that, in addition to controlling the amount of pollutants emitted, also generates a rapid rate of national economic growth and a more equal income distribution. The two case studies analyzed in this book are air pollutants originating in industrial and transportation sectors and pesticides used in the agricultural sector in Indonesia. This book is based on the dissertation that the author wrote while in Cornell University in the mid 1990s. Nevertheless, the topics discussed are still very relevant today in developing environmental policies, including those on climate change. The author hopes that its publication will inform other researchers and policy-makers of his analysis, so as to contribute positively to the development of environmental policy debates in developing countries.