With the development of economy, environmental problems have become increasingly prominent and become the bottleneck restricting economic development. Traditionally, environmental protection and economic development are contradictory, and economic development must be at the expense of destroying the environment, while environmental protection will limit economic development. This paper holds that economic development and environmental protection are not contradictory, but due to improper system design, they are mutually restricted. By reforming some existing environmental systems and innovating environmental systems, we can provide enough incentives for economic subjects, and link environmental protection with the behavior of maximizing the interests of economic subjects, so as to realize the combination of environmental protection and economic life. This paper analyzes the causes of environmental problems and related theories, and puts forward countermeasures and suggestions to solve environmental protection problems in the conclusion. 1 Complexity of environmental problems: which is more important, technology or system? Environmental problems are extensive and complex, involving technology, management and system. Technical level: research on effective technologies for pollution control and prevention, formulation of environmental quality standards, establishment of ecological protection zones, etc. On the management level, how to effectively organize and arrange production according to the established system; System level: design the system and reasonably construct the property rights and interests of relevant subjects, such as the relationship between pollutant discharge enterprises and polluted economic subjects. In the study of environmental and ecological problems, there was a debate: which is more important, technology or system? Years of environmental protection practice have proved that system is a more important factor, and good system will give birth to good technology. If the system design is unreasonable, it will inhibit the production of efficient environmental protection technologies. At present, China's pollution control policies and systems are relatively simple, with sewage charges as the main form. However, due to the disadvantages of the charging system itself, the lack of incentive mechanism and the ineffective supervision of enterprises to control pollution, this system has been inefficient in the implementation process. The focus of this paper is to study environmental protection from the institutional level. The field that the government should play a role in the process of environmental protection is to formulate effective systems and ensure their implementation. The technical problem is the result of the independent choice of the main body of the market economy under the established institutional conditions, without government intervention. Therefore, the key to environmental pollution and ecological protection lies in system design. 2. The relationship between economic development and environmental protection: From mutual restriction to mutual development, the traditional view holds that economic development will inevitably lead to pollution, and economic development and environmental protection are contradictory. Environmental pollution and ecological deterioration are the inevitable results of human economic development. If we want to develop the economy, we must bear the cost of environmental pollution, otherwise the economy will lose its development space. Under the condition that economic growth has become an important macroeconomic goal of all countries, this view once became a legitimate reason to destroy the environment. The economic development of many countries, especially some developed countries, seems to confirm this point, and almost all of them have adopted the method of developing the economy first and then managing the environment. But this can't be used as a learning model for developing countries. At that time, the situation of environmental resources faced by developed countries was incomparable now. At that time, developed countries achieved rapid economic development under the condition of relatively sufficient resource endowment. Economic development and population expansion have relatively little pressure on the environment, and environmental threats are potential. However, at present, after hundreds of years of world economic development, the supply of environmental resources is relatively reduced, while the demand for it is increasing, and the pressure on the environment is increasing. The resources consumed by human economic development are decreasing day by day, and the scarcity of environmental resources is becoming increasingly prominent. Therefore, the road of developing first and then managing is no longer feasible. Without protecting environmental resources, the economy can't develop at all. Second, the source of environmental pollution and ecological destruction: both are caused by the system. 1. The fanatical pursuit of national income and the distorted GDP accounting system can be traced back to the early research of welfare economics. Marshall used the name of national income for the first time in economic literature, but national income has been applied in the theory of Pigou, a British welfare economist, and has become an important content in the study of welfare economics. Pigou interprets welfare as a subjective psychological state, which can be measured in turn and can be linked with the measure of money. Objectively, the concept of national income is used to measure the welfare state. And put forward three welfare standards: expanding the scale of national income, its effective distribution and stability. Since then, Pigou put forward the concepts of marginal social cost and marginal private cost, and further put forward the concept of externality. Externality occurs when one person's consumption or production activities of an enterprise have a non-original impact on another person's utility or another enterprise's production function. When this enterprise does not have to bear the cost that its production brings to society, that is, the marginal social cost