<p>The thermal power industry is a core component of China’s energy system, yet it remains one of the country’s largest sources of carbon emissions. As China moves toward its 2030 carbon-peaking commitment, the industry now faces intensified pressure to reduce emissions while maintaining reliable power supply. This paper proposes a stepwise environmental benchmarking approach that maps out a practical pathway for the thermal power industry to enhance environmental sustainability under carbon constraints. The method identifies attainable green performance targets for each province, showing how environmental efficiency can improve under progressively tighter carbon constraints. The results reveal substantial regional differences. Provinces such as Liaoning, Heilongjiang, and Guizhou face the greatest difficulty, requiring three steps to reach full environmental sustainability. In contrast, most other inefficient provinces can achieve their targets through one- or two-step pathways. Based on these findings, we offer policy recommendations related to regional disparities, workforce allocation, and carbon-reduction goal setting to support a smoother and more coordinated transition toward carbon peaking.</p>