Consider the following statements:

1. Statement-I: Carbon markets are likely to be one of the most widespread tools in the fight against climate change.
2. Statement-II: Carbon markets transfer resources from the private sector to the State.

Which one of the following is correct in respect of the above statements?

1. Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
2. Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
3. Statement-I is correct but Statement-II is incorrect
4. Statement-I is incorrect but Statement-II is correct

Explanation

Statement-I is correct

• In order to meet their nationally determined contributions (NDCs), one mitigation strategy that is becoming popular with several countries is carbon markets. Article 6 of the Paris Agreement provides for the use of international carbon markets by countries to fulfil their NDCs. Carbon markets are essentially a tool for putting a price on carbon emissions— they establish trading systems where carbon credits or allowances can be bought and sold. A carbon credit is a kind of tradable permit that, per United Nations standards, equals one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere. Carbon allowances or caps, meanwhile, are set by countries or governments based on their emission-reduction targets. According to the United Nations Development Program report released in 2022, interest in carbon markets is growing globally: 83% of NDCs submitted by countries mention their intent to use international market mechanisms to reduce greenhouse gas emissions.

Statement-II is correct, and Statement-II is not the correct explanation for Statement-I

• Carbon markets generally function by channelling resources from emitters—primarily in the private sector—to entities capable of reducing or removing greenhouse gas emissions, which may include both private players and government bodies. Therefore, Statement 2 can also be considered correct.
• The transfer of resources from the private sector to the State is not the reason why these mechanisms are expected to become among the most widely used tools in the fight against climate change.

Answer: (b) Both Statement-I and Statement-II are correct, and Statement-II is not the correct explanation for Statement-I; Difficulty Level: Easy