This chapter explores the role of various causal drivers for the establishment of China's carbon market - international diffusion, and as a complementary explanation, domestic conditions -  and how these affected both the decision to launch a carbon market and the design process. Domestic conditions and concerns have been the basis throughout the process, from before the 2011 decision to establish a carbon market, and up to the latest publications of design rules. A complex set of reasons and drivers has determined actual policy choices and design options for the ETS. A unique feature of this case is internal learning. Testing out a new mechanism or policy on a smaller scale before adopting it nationwide is a common feature of Chinese politics.