Based on a manually compiled directory of regulated firms in pilot carbon markets, this study empirically examines the impact of the carbon emission trading scheme on green transformation through its “bottom-up” transmission along the supply chain. The findings reveal that when customers are subject to the constraints and incentives of the carbon emission trading scheme, they can drive their suppliers’ green transformation, with persistent effects observed in the long term. Moreover, pressure transmission effects and benefit-driven effects are identified as key drivers of suppliers’ green transformation. The pathway for suppliers involves moving away from “superficial and end-of-pipe” transformations toward achieving “substantive and cleaner production” transformations. Further analysis shows that the promoting effect of customers’ inclusion in carbon emission trading pilots on suppliers’ green transformation is more pronounced when suppliers operate in regions with stronger government environmental governance or possess lower cost-pass-through capabilities. Additionally, the application of artificial intelligence technology by suppliers can provide essential support for their green transformation. Finally, when customers are included in carbon emission trading pilots and drive their suppliers’ green transformation, a win-win effect of green supply chain collaboration is generated, which becomes more effective over the long term.