Abstract: Market-based instruments for environmental protection are being rapidly adopted and attached importance to by environmental management departments of some countries (particularly in USA). This paper analyzes first the relation of market instruments and traditional regulatory means; then describes the application of three types: of market-oriented tools, and advances the technical principles for designing market instrument. The authors think that the market-based instruments will provide new alternatives for reforming Chinese environmental managemut system with deepening and widening the economic "System reform based on the market mechanism.