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?
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
Correct Answer
D
Statement-I is incorrect but Statement-II is correct
Explanation
Statement-I is correct as carbon markets are a primary global tool for emissions reduction, but Statement-II is incorrect because these markets primarily facilitate resource transfers between private entities (emitters and credit-generators) rather than a direct transfer to the State. Option (a) is the most tempting error if one confuses carbon markets with carbon taxes, which are direct fiscal transfers to the government. The core concept tested is the mechanism of **Carbon Pricing** and the operational logic of market-based environmental instruments.
Climate Change MitigationCarbon Pricing & MarketsCarbon marketsCap-and-tradeCarbon creditsPrivate sectorState resources