Since the EU-ETS was placed at the centre of EU climate governance in 2003,its influence has not been restricted to environmental policy but has spread to theeconomic and political domains. But its implementation remains blocked even after the EU revised it by the Climate and Energy Package (CEP). The larger problem is, the ‘East-West’ split toward the revised EU-ETS triggered by the ambitious but ‘missions complicated’ CEP and diffused to energy governance, which put EU's climate governance into the deadlock (Wettestad, 2014). Skjærseth and Wettestad (2009, 2010) argued that the revised EU-ETS could be the result of the changing MS’ preferences, but they did not unpack these preferences formulated during the EU-ETS implementation. This thesis fills the gap by reinvestigating the EU-ETS implementation to identify what the domestic contextual factors are and how they affect and reshape MS’ preferences to the EU-ETS. By applying the five stage policy-making cycle andthe multilevel governance (MLG) in this study, it is concluded that the difficulty offixing the EU-ETS is not merely limited to the revised climate governance structure, but also the need to reconcile MS’ energy-economic structures and coordinate with their climate and energy policy. To solve the MS’ problem of ‘asymmetrical energy-economic interests’, it is vital for the EU to improve the cross-level reconciliation between the EU-ETS and national energy policies and to increase the coordination between policy instruments when reforming the EU’s climate governance structure. The EU-ETS development encourages both national and EU’s climate governance structures to fall in line with MLG concepts (flexible design and more jurisdictional levels involved in the policy network). Therefore, it has become the turning point of European integration, by which the traditional dichotomy between ‘top-down’ and ‘bottom-up’ integration starts transitioning to the ‘two-way reconciliation.’