This study investigates the impact of China's carbon trading policy (CTP) on enterprises' energy-saving behavior. Using a difference-in-differences (DID) method and a comprehensive firm-level dataset from 2009–2015, the research evaluates the effects of the CTP on enterprises' energy consumption and efficiency. The findings show that after the implementation of the CTP, enterprises' coal consumption and coal intensity decreased by approximately 34% and 33%, respectively. The policy effect is more pronounced for larger companies and firms in energy-intensive sectors, and its effectiveness strengthens over time. The results support the common trend assumption and indicate that the policy improves productivity through increased investment in equipment and output. The study also reveals that the CTP achieves energy conservation by encouraging firms to improve fixed asset investments and management practices rather than through production cuts. The research contributes to three key gaps in the literature. First, it shows that the CTP improves environmental investment and reduces carbon emissions, enhancing air quality and promoting low-carbon economic transformation. Second, it highlights that region-level studies may overestimate the policy's effects due to the pollution haven effect, while firm-level data provides more accurate insights into sector-specific impacts. Third, it demonstrates that the CTP enhances firm-level total factor productivity (TFP) and low-carbon innovation, but further research is needed to understand its impact on energy efficiency and underlying mechanisms. The study uses a DID model to analyze the impact of the CTP on coal consumption and intensity, incorporating firm and year fixed effects. The results show that the CTP significantly reduces coal consumption and intensity, with larger firms and energy-intensive industries experiencing stronger effects. The policy also leads to increased investment in equipment and management, improving energy efficiency. The study also controls for other policies, such as the low-carbon pilot city program and SO₂ emission charges, and finds that the CTP's effects remain significant even after these controls. The underlying mechanisms of the policy's impact are attributed to increased investment in equipment and improved management practices, rather than reduced production. Overall, the CTP effectively reduces coal consumption and improves energy efficiency, with stronger effects over time.This study investigates the impact of China's carbon trading policy (CTP) on enterprises' energy-saving behavior. Using a difference-in-differences (DID) method and a comprehensive firm-level dataset from 2009–2015, the research evaluates the effects of the CTP on enterprises' energy consumption and efficiency. The findings show that after the implementation of the CTP, enterprises' coal consumption and coal intensity decreased by approximately 34% and 33%, respectively. The policy effect is more pronounced for larger companies and firms in energy-intensive sectors, and its effectiveness strengthens over time. The results support the common trend assumption and indicate that the policy improves productivity through increased investment in equipment and output. The study also reveals that the CTP achieves energy conservation by encouraging firms to improve fixed asset investments and management practices rather than through production cuts. The research contributes to three key gaps in the literature. First, it shows that the CTP improves environmental investment and reduces carbon emissions, enhancing air quality and promoting low-carbon economic transformation. Second, it highlights that region-level studies may overestimate the policy's effects due to the pollution haven effect, while firm-level data provides more accurate insights into sector-specific impacts. Third, it demonstrates that the CTP enhances firm-level total factor productivity (TFP) and low-carbon innovation, but further research is needed to understand its impact on energy efficiency and underlying mechanisms. The study uses a DID model to analyze the impact of the CTP on coal consumption and intensity, incorporating firm and year fixed effects. The results show that the CTP significantly reduces coal consumption and intensity, with larger firms and energy-intensive industries experiencing stronger effects. The policy also leads to increased investment in equipment and management, improving energy efficiency. The study also controls for other policies, such as the low-carbon pilot city program and SO₂ emission charges, and finds that the CTP's effects remain significant even after these controls. The underlying mechanisms of the policy's impact are attributed to increased investment in equipment and improved management practices, rather than reduced production. Overall, the CTP effectively reduces coal consumption and improves energy efficiency, with stronger effects over time.