Abstract: Most of literature relate to the impact on corporate emission when they study on the choice of different environmental regulation tool. There's still less study about the different choice of environmental regulation tools impacts on the social welfare. Existing studies have shown that environmental externalities will lead to reduce social welfare. However, the choice of different tools of environmental regulation have different impact on social welfare. This article compares the social welfare when environmental policy makers choose the regulation tool of pollution discharge fee or transferable emission license, and provide some advice for policy-maker.