Abstract: Environmental investment not only promotes environmental industry by “demand effect”, but also influences environmental industry by “technique effect”. This paper collected data for environmental listed companies from 2003 to 2010, and investigated the relationship between environmental investment and environmental industry development using mediator model. The “demand effect” was proved, and the“technique effect” has not yet appeared. Thus, on one hand, the promoting of environmental industry by environmental investment should be noted, and on the other hand, the structure of environmental investment should be adjusted to promote the “technique effect” of environmental investment.