Abstract: The 'Two Mountains Theory' (TMT), referring to the theory of 'Lucid Waters and Lush Mountains are Invaluable Assets', is an integral part of Xi Jinping's Thought on Ecological Civilization which emphasizes ecological sustainability while improving human wellbeing. In order to explore how environmental economic policies can better serve the transformation of 'lucid waters and lush mountains' (LWLM) into 'gold and silver mountains' (GSM), this paper explains the concept of 'LWLM' and 'GSM', clarifies the connotations of the theory, indicates the path of the transformation, and puts forward the work point and suggestions for environmental economic policies to promote the application of the theory. The results show that:(1) The core connotation of the theory is that LWLM and GSM coexist and are supportive, complementary and transforming mutually as LWLM refers to the natural resources that can be sustainably utilized and transformed into GSM under the green development model, while GSM refers to the and well-being of the people and their livelihood. (2) How to transform LWLM into GSM with high quality and high efficiency, and how to draw support from GSM to protect LWLM is an important aspect of the TMT. (3) The transformation path includes protecting LWLM and increasing its value, developing the ecological economy, accelerating the transformation and upgrading of traditional industries, introducing high-end intelligent industries, and perfecting the transformation mechanisms. (4) Environmental economic policies as a whole can play a role in areas such as determination of property rights of LWLM, LWLM value accounting, how to make the LWLM value enter into the economic and social development truthfully, and how to make LWLM's protectors benefiting from GSM, reducing the cost of transformation and cultivating the green capital market.