UPSC Prelims 2023 – Question 23

Q23. 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-Il: Carbon markets transfer resources from the private sector to the State.  

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

(a) Both Statement-I and Statement-II are correct and Statement- II is the correct explanation for Statement- I 

(b) Both Statement-I and Statement-II are correct and Statement- II is not the correct explanation for Statement-I.  

(c) Statement I is correct but Statement II is incorrect  

(d) Statement I is incorrect but Statement II is correct 

Correct Answer: Option (b) 

• 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. Carbon markets, for years short of puff, have at last become one of the most widespread tools in the fight against climate change. By the end of 2021 more than 21% of the world’s emissions were covered by some form of carbon pricing, up from 15% in 2020. Hence, statement 1 is correct. 
• Carbon markets are designed to create a financial mechanism that encourages the reduction of greenhouse gas emissions. In carbon markets, companies and organizations can buy and sell emissions allowances or credits, which represent the right to emit a certain amount of greenhouse gases. While carbon markets can generate revenue for the government through the sale of emissions allowances, it is not accurate to say that they transfer resources solely from the private sector to the government. Hence, statement 2 is not correct. 

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