Based on the panel data of 30 provinces and municipalities in China from 2006 to 2020, the carbon emission trading policy was adopted as the quasi-natural experiment. The effect of energy conservation and emission reduction in the thermal power industry from the two dimensions of carbon dioxide emissions and green total factor productivity were evaluated. A difference-in-difference model was used to empirically analyze the effect of carbon emissions trading policy on energy conservation and emission reduction in the thermal power industry. The results show that the carbon emission trading policy could reduce the carbon dioxide emissions of the thermal power industry, but had no impact on the green total factor productivity of the thermal power industry. The analysis of potential emission reduction mechanism found that the reduction of carbon dioxide emissions was achieved by reducing thermal power generation, and the reduction of thermal power generation was caused by the decision of the power planning department. The discussion on the effect of carbon emissions trading policy found that the carbon emissions trading policy did not produce carbon spillover effect, and the pilot areas and neighboring provinces were actively turned to new energy power generation under the influence of the carbon emissions trading pilot policy. Under the constraint of ecological environment, China’s thermal power industry needs to accelerate the transformation of energy conservation and emission reduction.