The pilot carbon emission trading schemes (ETSs) of China were created to combat climate change in a cost-effective and economically efficient manner, and their potential impact on regulated firms has drawn increasing attention. This study is conducted to provide empirical evidence on the effect of China’s pilot ETSs on firm-level financial performance during the period from 2008 to 2017. The empirical results show that the ETS pilots have a positive impact on firms’ profitability and value, and a negative impact on operational costs. We also find that the ETS pilots improve total factor productivity (TFP) but that changes in technology have an indirect suppressing effect on the relation between the ETS and short-term financial performance, providing support for the weak version of the Porter Hypothesis. Further, we show that the carbon emission price has a negative impact on firms’accounting-based performance but increases firms’ market value. Finally, we find evidence that, in contrast to state-owned enterprises (SOEs), non-SOEs do not experience significant improvements in their financial performance, led by the ETS pilots. Our findings have policy implications for firms’sustainable development and the transition to a low-carbon economy.