The cap-setting model adopted by the EU in 2008 has been coined a ‘revolution of EU governance.’ A new model was invented, combining a significantly new depth, new breadth/scope and a new time horizon. An analysis of main determinants reveals both internal and external drivers. Internally, the crisis in the spring of 2006 contributed to a window of opportunity for entrepreneurship and invention. The broader EU climate and policy context shaped both the overall level of ambition and the time horizon for the ETS phase III. As to EU-external factors, the level of ambition was also shaped by the hopes of a breakthrough in Copenhagen in 2009. Subsequent events may lead to the conclusion that the model was a failed innovation. A significant surplus of allowances has accumulated, and a carbon price too low to foster low-carbon transition. But the ETS was a ‘new grand experiment’ with limited experience to build upon and the financial crisis from 2008 was a big surprise. As a mode of climate governance, the promises include the ability to put climate concerns higher on corporate agendas, even in periods of low allowance scarcity and a volatile carbon price. But so far the deeper transformative contribution has been moderate.