The Research On The Financial Instruments Of Environmental Protection

Along with the rapid economic progression and human development, environmental problems have become an important issue that attracts greater attention. With the reform and opening up of China, our environmental protection has improved very much. The concept of sustainable development has been widely accepted and implemented. However, China is still a developing country with few resources and a great amount of people, and it's in the process of urbanization and globalization, which present not only the opportunities of development, but also challenges, especially in the sense of environment and natural resources. It is inevitable to acknowledge the fact that we are facing tremendous conflict between rapid economic development and scarcer natural resources to sustain that development, not to mention the pollution problems we have in many areas are increasingly threatening. It is thus obvious to us that tackling environmental and natural resources problems now would make great sense to ensure the long-term sustainable development of our country.The financial instruments to protect environment is a core part of economic instruments innovation. Based on the issue of environmental protection, this paper is focused on the discussion of the definition of financial instruments in environmental protection, why we need creative financial instruments, and how to construct a new and effective model of financial instruments. The first chapter as the summary part explained the importance of the research in financial instruments of environmental protection, the basic idea and structure, and the creative points of this paper. Chapter two summarized the basic theories of financial instruments of environmental protection, including the major environmental problems, the commonly used financial instruments of environmental protection, the origin and development of theories in environmental finance, and the research development in financial instruments of environmental protection. Chapter three further focused on the introduction of the financial instruments of environmental protection, including the definition and the connotation, the relative application in China, the different financial instruments(green financing, environmental fund, governmental bond, emission trade, pollution responsibility insurance), the cooperative use of financial and other instruments, and the analysis by the game theory. Chapter four introduced the new theories of public services and green financing, including the theoretical development of new public management and new public services, the idea of public products and new public products supply, the improvement for the environmental protection financing routing by the idea of new public products supply, and the creative concept of combining the idea of new public product supply and the green financing theory. Chapter 5 analyzed the motives of developing green financing, including the strategic needs of banks to avoid environmental risks, the high pertinence between the environmental investment and economic growth, and irrational direct of current bank financing. Chapter six analyzed the status quo of usage of financial instruments in China, found out the current problems and the origins of these problems. Based on the previous chapters, chapter seven provided the series of suggestions to promote the development of green credit in China, including the improvement of information-sharing policy in environmental protection, operational transformation of policy-lead banks and the enhancement of environmental functions, the definitude of the environmental responsibility of commercial banks, the improvement of banks'structure of governance, and enact the green financing of banks.This paper demonstrated that: the financial instruments are very important to enhance environmental protection, and are the integral components of the policies of environmental economy in China; the current financial instruments, which include green financing, environmental fund, governmental bond, emission trade, and the insurance of pollution responsibility, are still need to improve theoretically and practically, in order to enrich and consummate the national financial instruments system; the green financing concept is based on the theory of new public services; the application of green financing grew very fast in China, but still got some restrictions; we could solve these problems by the improvement of information-sharing policy in environmental protection, operational transformation of policy-lead banks and the enhancement of environmental functions, and other relative policy enhancement.This paper applied various kinds of research methods, including normative and empirical ones. It thoroughly analyzed the development of green financing instrument of China, based on the comparative study of foreign advanced theories and experiences. Meanwhile, it applied normative method to explore major measures to improve the usage of green financing. Then, this paper applied qualitative and quantitative methods to analyze the financial instruments of environmental protection, especially applied game theory and advanced statistic methods. Finally, it applied both micro and macro analysis. Financial instruments utilization is a strategic issue, which involves a lot of factors, both socially and economically. In the meantime, it's a tactic issue as well, the financial instruments'applicability in micro-world, especial in enterprises, determines its successful implementation and widespread adaptation.The writing route of this paper could be explicit as: collecting information and doing field survey—quantitative and qualitative analysis—discovering the essential problems—empirical and normative research—setting a series of policies.From the analysis of financial instruments in environmental protection, this paper demonstrated a model and structure of financial instruments innovation, and gives major suggestions and advices on ensuring successful financial instruments innovation, to some extend, it further enriched the theories of financial instruments. The result of this paper can be valuable to various levels of government agencies(especially banks) and decision makers to provide them scientific evidences to formulate their environmental protection strategies.