Carbon emissions trading is playing an important role in reducing greenhouse gas emissions, while target setting is the first key element of the legal framework for emissions trading. In this paper, the legislation and practice concerning the emissions reduction target and cap setting in the EU ETS will be firstly examined. Secondly, the competence allocation between the EU and the member states in the decentralized and centralized models applied in the target setting of the EU ETS will be explored separately. Finally, based on the comparative analysis and lessons from the EU ETS, suggestions for choosing the types of emissions reduction target, distributing competence between different levels of authorities and preventing the potential 'waterbed effect' problem will be put forward for China to establish its own pilot projects of carbon emissions trading system.