This study constructs a quasi-natural experiment on the basis of carbon emission trading system (CETS) pilot zones, and then explores the effect of carbon emission trading system on corporate energy saving and emission reduction (ESER). Using a staggered difference-in-difference approach and the data on ESER of Chinese listed firms over 2010-2017, our findings reveal that ESER performance is better for firms that are engaged into the CETS trials than for their counterparts, suggesting that carbon emission trading system promotes corporate ESER performance. In addition, CEOs’ overseas experience reinforces the positive effect of CETS on ESER performance. Moreover, the positive impact of CETS on ESER performance is more pronounced for firms in polluting industries and highly competitive industries, CETS is significantly positively associated with both green innovation and environmental cooperation in value chain, and CETS can significantly mitigate carbon emissions at the firm level. Our findings provide important references to understand the governance role of CETS.