Financial Innovation in Solving Environmental Problems Caused by Externality

In order to better solve the environmental problem,the paper analyzes the source of environmental problems from the angle of economic growth, namely the negative externality, and discussed the possibility and approaches which the financial innovation has in solving environmental issues caused by negative externality. Firstly the paper defines the concept of externality,and analyzes how externality of economic activity leading to environment problems. Secondly,it analyzes the weak points of traditional administrative measures in dealing with environmental problems. Thirdly,it discusses the internalization of externalities and its feasibility. Finally, it discusses the utilization of financial innovation in achieving internalization of environmental problems and the possible ways to solve environmental problem.