This paper analyzed the economic factors that contribute to the pollution of the environment using Logarithmic Mean Divisia Index (LMDI) approach. Based on the Time-Varying Parameter Vector Auto-Regression (TVP-VAR) model, we investigated the impulse responses of those factors at different time points and different lead time. The results showed that technical progresses not only improved the productivity of enterprises but also promoted less-polluted production. The innovative compensation effect reduced pollution emissions. In China, coal combustion is a major component of energy production which makes coals smoke pollution currently the most significant source of environmental pollution caused by the energy structure. The rapidly increase of energy efficiency considerably reduced pollution emissions, but also showed a certain rebound effect. There were two important reasons hindering the radical improvement of environmental pollution-the unbalanced industrial structure and the expanding economic scale. Therefore, it is high time to reasonably control the structural factors and scale factors which are crucial ways of reducing pollution emissions.