Abstract: The environmental governance of rare earth industry is an important and practical problem inour country. Its policy-making and implementation are a vital way to control its pollution and destructiontowards environment. The paper first gives a brief introduction to environmental pollution made by rareearth industry. The theory basis of foreign environmental regulation is reviewed and analyzed from theperspective of market and government failure, externality theory and market mechanism theory. On thebasis of this, a brief review of the history of the foreign environmental regulatory is made in the aspectsof direct supervision, incentive mechanism and voluntary environmental management. China 's currentenvironmental regulation policy is also discussed. Finally, environmental management policy in China 'srare earth industry is proposed with aspects of environmental regulation system, supervision system, monitoring system, investment and financing mechanism and ecological compensation policy taken intoconsideration.