Subsidy and penalty are the two environmental regulatory policies that play an important role to promote low-carbon manufacturing. In this paper, using evolutionary game approach, we analyzed the behavioral strategies of manufacturers and local governments under four different subsidy and penalty mechanisms. Our results dynamic-subsidy-dynamic-penalty is the most effective mechanism to provide more incentives for the manufacturers to adopt low-carbon manufacturing strategies. In the long run, higher subsidy cannot increase the manufacturers' incentives for low-carbon transition while higher penalty is effective to increase the proportion of low-carbon manufacturing. It implies that penalty is more effective than subsidy to incentivize the manufacturers to choose low-carbon manufacturing.