UPSC Prelims 2023 Question:

Consider the following statements

Statement-I:

Carbon markets are likely to be one of the most widespread tools in the fight against climate change.

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?

Explanation:

• • Statement I suggest that carbon markets have the potential to become widely used tools in the effort to combat climate change. Carbon markets, also known as emissions trading systems or cap-and-trade programs, aim to reduce greenhouse gas emissions by creating a market for buying and selling carbon allowances or credits. By putting a price on carbon emissions, carbon markets provide economic incentives for industries to reduce their emissions and invest in cleaner technologies. This statement is generally correct as carbon markets have gained prominence globally as a policy instrument for addressing climate change. So, statement 1 is correct. 
  • Statement II states that carbon markets transfer resources to the state. Carbon markets involve transactions between the private sector and the State. For example, carbon markets can enable trade between developed and developing countries, between different sectors or industries, or between companies and the State Environmental Authorities. Carbon markets can also create opportunities for the private sector to invest in low-carbon projects and benefit from carbon credits.
    • Compliance markets and voluntary markets are the two main types of carbon markets.

• Compliance markets are made when a policy or regulation by the State is made at the national, regional, or international level.

• • National and international voluntary carbon markets are places where people can buy and sell carbon credits on their own time.
  • Most of the voluntary carbon credits that are available now come from private companies that create carbon projects or from government programmes that are certified by carbon standards and reduce or remove emissions.
  • Demand comes from people who want to make up for their carbon footprints, companies with sustainability goals, and others who want to trade credits at a higher price to make money. So, statement 2 is correct.

So, both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I.

Therefore, option (2) is the correct answer. 

Subject: Environment| Pollution