The primary role of the government for the market economy lies in establishing the system of property rights and administering it in an efficient way. Environmental issues may not be exceptional in that  the rights to the environment can be set up. The Constitution of our country specifies that people have the right to live in a healthy and clean environment. This is one of the most natural rights for life. People cannot live without consuming environmental resources like the air and water. Thus the Constitution gives people the right to use the environment directly for life. on the other hand, Environmental Law allows firms to emit pollution to the environment to the degree that legal emission standards are not violated. The Law gives people the right to pollute the environment in producing means of living like goods and services. This right is concerned about the way in which the environment is used indirectly for life. Both rights are indispensable for human life. The former can be considered the environmental right and the latter the emission right. Conflicts between the two rights have been aggravated as industrial production is expanded.

Social dissatisfaction with environmental qualities seems to worsen in the face of stricter environmental regulations and increased expenditures for pollution abatement. It means that environmental problem is not properly managed. There may be several reasons for environmental mismanagement. First of all, environmental standards might be too loose compared to environmental amenity the society wants to live with. Second, even if the standards are properly set, they might be implemented inefficiently or inappropriately. Those issues are related to the establishment of property rights to the environment. Specifically, we need to check that environmental standards are suitable to balance environmental rights against emission rights and that these rights are protected and traded as efficiently as possible. The goal of the paper is to propose an alternative approach to the environmental problem of our country from the perspective of the theory of property rights based upon the review of environmental realities and on the evaluation of policy instruments. We emphasize that property rights can be effective in dealing with environmental issues which allows the government to play  its primary role of protecting and monitoring the rights to the environment and that the market principle must be adopted in allocating  externalities which deserves property rights. It is a matter of convention to take for granted the intervention in using emission rights and to think enforcing a special type of soap in the bathroom as a violation of the human right to have clean life.

To attain our goal, performance of environmental policy is evaluated by analyzing environmental statistics about water and air qualities with reference to environmental standards and comparing pollution abatement expenditures with those of the OECD countries. To figure out how people feels about the current quality of the environment, a survey about social consciousness of the environmental problem is discussed. Coase Theorem is applied to the allocation of property rights to the environment. We emphasize the impact of transaction costs on assigning property rights to externalities. Liability rule takes an advantage over property rule in cases that voluntary transactions are not feasible. Environmental policy instruments are compared within those theoretical framework. We argue that the market principle must be adopted where it can work. To illustrate how market-based policies work, we take a case study of water pollution issues of Nakdong River renewed by building Uycheon Industrial District.