<p>As China’s carbon emissions continue to rise amid rapid economic growth, establishing a robust national carbon trading market remains critical for balancing sustainability with development. This study examines the driving factors behind carbon pricing mechanisms in China’s seven regional pilot markets (Beijing, Shanghai, etc.), addressing gaps in unified standards, regulatory frameworks, and international cooperation when compared to mature systems like the European Union Emissions Trading System. Using monthly data on energy prices, industrial indices, and financial market stability from 2014 to 2017, we applied factor analysis to quantify their effects on carbon prices. The results showed that carbon prices were positively correlated with both domestic and international energy prices but negatively associated with industrial output and financial market stability. Key contributions include identifying region-specific price disparities linked to quota allocation mechanisms (e.g., auctions vs. free allocations) and proposing three targeted recommendations: (1) harmonise regional quota allocation and auction pricing to reduce price volatility; (2) unify market rules and strengthen legal penalties to enhance regulatory credibility; and (3) align long-term emission goals with corporate incentives while establishing a national monitoring system to improve data transparency. This study offers empirical evidence for optimising China’s carbon pricing system, highlighting the urgency of institutional integration and strategic policy design to support the development of a cohesive national carbon market. Highlights. Differences between China and EU carbon emissions trading market are analyzed. Reveals energy prices as dominant driver of China’s carbon market price fluctuations. First study integrates financial stability indicators into China’s carbon pricing model. Quantifies supply–demand imbalance effects across 7 pilot carbon markets.</p> Graphical Abstract <p></p>