Against the backdrop of “Carbon Peak” and “Carbon neutral” targers, this paper extends Tobin Q theory to the context of carbon emission reduction (henceforth, CER) to develop an asset equilibrium pricing model for a firm with agency conflicts. It further demonstrates that, on the one hand, CER mitigates the negative effect of social environment concerns on capital stock, thereby increasing future consumption and decreasing the volatility of future marginal utility. On the other hand, CER results in additional costs. Moreover, CER leads to capital underinvestment, a higher risk-free rate, an increased dividend yield, a lower equilibrium risk premium, a higher Tobin Q and a reduced agency cost for the controlling shareholder. Finally, the volatility of capital stock, risk aversion, and social environment concerns increase CER, while the controlling shareholder’s cash-flow rights, investor protection, and the margin cost of CER reduce it.