<p>As a core market-based instrument for carbon management, China’s national carbon market is expected to reduce emissions and facilitate the technological transformation required for decarbonization. However, whether it primarily promotes breakthrough or incremental green innovation remains unclear. Using firm-level data and a double machine learning model, this study examines the effect of the national carbon market on firms’ breakthrough green innovation. The results show that the national carbon market significantly promotes patenting in newly entered green technological domains. This effect is more pronounced among state-owned enterprises, particularly local state-owned enterprises, firms operating in more concentrated markets, and those located in regions with stricter environmental governance. Mechanism analyses indicate that this effect is primarily driven by alleviated financing constraints and improved resource allocation. In addition, the green innovation effect is strongest when the carbon market is combined with green subsidies, followed by innovation subsidies. These findings provide new evidence on how carbon market policies shape the technological direction of green innovation and offer policy implications for improving carbon market design.</p>