The　establishment　of　a　carbon　trading　market　is　crucial　for　China　to　fulfil　its　carbon　emission　commitments　through　a　market　mechanism.　As　a　market-based　environmental　regulation　instrument, Emission　Trading　Scheme　(ETS)　has　been　attracted　increasing　attention　worldwide,　while　the　effect　of　ETS　on　low-carbon　economy　efficiency　(LEE)　has　not　been　fully　investigated,　thus　inspiring　us　to　fulfil　this　research　gap.　Using　the　panel　data　of　China’s　283　selected　prefecture-level　cities　during　2006–2017,　we　adopted　the　difference-in-differences　(DID)　model,　propensity-score-matched　DID　(PSM-DID)　model,　and　the　spatial　DID　model　to　model　the　direct　and　indirect　effects　of　China’s　ETS　on　LEE　at　national,　regional,　and　local　(resource-based　cities　with　different　development　stages)　levels.　The　robust　results　yield　that　ETS　directly　and　significantly　improved　China’s　LEE　at　the　national　level.　Still,　the　LEE　in　ETS　pilot　region　will　increase　by　approximately　4.3%　compared　with　untreated　cities,　while　the　spatial　heterogeneity　of　this　effect　is　captured　at　regional　and　local　levels,　which　emphasises　the　necessity　of　a　completed　market　construction　and　classified　supervision.　The　results　of　this　paper　provide　important　insights　for　strengthening　the　policy　design　of　a　nationwide　carbon　market,　and　a　reference　point　for　other　regions　and　countries,　especially　developing　countries,　in　refining　a　carbon　trading　market.　©　2022,　The　Author(s).