This report takes additional steps towards specifying the key variables in ways that can be used, ultimately, for data collection and processing in the ETS DIFFUSION project. It also indicates some preliminary hypotheses and expected findings from the empirical research. In all cases we know of, emissions trading is only one component of more complex policy systems for dealing with climate change. We therefore begin by some reflections on the interplay between emissions trading and other policy instruments. The next section defines the dependent variable. Since our ambition in this project is to gain a better understanding of the role of diffusion in spreading not only the basic idea of emissions trading but specific system designs in particular, this section identifies a set of design features that can be used to describe similarities and differences across emissions-trading systems. The following section is devoted to a similar exercise for the focused explanatory variable: policy diffusion. Then we briefly discuss how to address other explanations than diffusion. The final section presents some reflections on method, case selection, and empirical coverage.