Climate　change　is　a　critical　global　concern,　and　China＇s　carbon　emissions　trading　system　(ETS),　which　was　introduced　in　2011,　has　significantly　contributed　to　fostering　green　innovation.　Based　on　the　panel　data　of　284　cities　in　China　from　2006　to　2020,　the　study　examines　the　impacts　and　mechanisms　of　ETS　on　green　innovation　using　difference　in　differences　method　(DID),　mechanism　testing　models,　and　moderating　effect　models,　and　explores　the　spillover　effects　of　the　policy　with　the　help　of　spatial　Durbin　models.　The　study　finds　that　overall,　ETS　can　significantly　promote　green　innovation,　with　a　more　significant　incentive　effect　observed　for　eastern　and　western　cities　and　resource　cities.　In　terms　of　the　mechanism　of　action,　ETS　promotes　green　innovation　by　reducing　the　scale　of　foreign　investment　and　improving　the　quality　of　foreign　investment.　Additionally,　government　environmental　attention　can　significantly　and　positively　regulate　the　relationship　between　ETS　and　green　innovation.　From　a　spatial　spillover　perspective,　ETS　can　significantly　enhance　green　innovation　in　local　cities,　but　it　may　also　inhibit　green　innovation　in　neighboring　cities.　The　findings　of　this　study　hold　significant　implications　for　expediting　the　transition　towards　a　green　economy　and　promoting　sustainable　development.