Abstract: The event of the floating dead pigs in the Huangpu river of Shanghai has aroused public attention on the security of the public drinking water and the environment pollution of the pig-raising industry. This paper will analyze the formation factors of environmental externalities caused by the event of floating dead pigs from the following aspects, that is, the influence of the economy and public policy, the awareness of the eco-environment and the management of the pig-raising industry. And the basic features of environmental externalities including public, transferable, dispersive and speculative will be discussed in this paper. Based on the above, this paper will put forward some useful countermeasures from the perspective of economy, public policy, technology and the eco-environment culture to tackle the problems on how to internalize environmental externalities.