In today's society, environmental protection and sustainable development have become the focus of global attention. Carbon emission trading, as an effective means to reduce greenhouse gas emissions, has been adopted by many countries and regions. In China, the launch of pilot policies for carbon emissions trading is of great significance in promoting economic transformation, promoting industrial upgrading and protecting the environment. Therefore, it is of great value to study the innovation effect of the pilot carbon trading policy and its transmission path for evaluating the effect of the policy, optimizing the policy design and building the carbon market in the future. Based on the production network theory, this paper constructs a difference in difference model, and uses empirical analysis to evaluate the direct innovation effect and innovation network spillover effect of the pilot carbon emission trading policies. In the empirical analysis, a variety of data sources are used, including public data from the National Bureau of Statistics, annual reports of enterprises, and industry associations, to ensure the reliability and validity of the data. At the same time, SPSS, Stata and other statistical software are applied to process and analyze the data in order to better understand and interpret the research results. The results show that the pilot carbon emission trading policy has a positive effect on improving the innovation level of both regulated and non-regulated industries in the pilot areas. Specifically, this policy can promote the technological innovation and management innovation of the regulated industries, but also promote the technological progress and market development of the non-regulated industries. In addition, the policy will also have an innovation network spillover effect, that is, the innovation results of the policy will be transmitted to the surrounding regions and industries, thus promoting the innovation and development of the entire region and industry. Further, this paper also discusses the transmission path of the innovation spillover effect of pilot carbon emission trading policies. It is found that the policy has a negative impact on the innovation of the relative upstream industry, but significantly promotes the innovation of the downstream industry. This is because the upstream industry, after being impacted by policies, often takes measures to reduce costs and improve efficiency to deal with the challenges, which may have a certain negative impact on the downstream industry. However, downstream industries are more likely to benefit from the innovation spillover effects of policies because they are more closely linked to the carbon emission trading market. Finally, this paper also tests the mechanism of the pilot carbon emission trading policy. It is found that the innovation spillover caused by this production-end shock is mainly realized through the price transmission of finished products. In addition, the inclusion of industries with strong bargaining power and close links with downstream industries in the national pilot carbon emission trading policy is more conducive to the innovation spillover effect of the policy. This is because these industries have stronger market influence and bargaining power, and can better promote the construction and development of the carbon emission trading market.
