Using a sample of listed Chinese companies between 2010 and 2019, this study examines the impact of the carbon emissions trading scheme (ETS) on audit reporting aggressiveness. We find that the ETS implementation reduces audit reporting aggressiveness. The mechanism tests indicate that the incremental carbon and environmental-related information provided by emission-regulated companies enhances auditors’ prudence, leading to informed judgments. Further analysis reveals that auditors with comparatively lower competency benefit more from the incremental information, and the ETS impact is more pronounced for firms with strong external monitoring and higher carbon risk, which indicates varied incremental information value for auditors' judgment.