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
Correct answer
C
Statement-I is correct but Statement-II is incorrect
D
Statement-I is incorrect but Statement-II is correct
Explanation
Statement I is correct: carbon markets, both compliance schemes such as the EU Emissions Trading System and voluntary credit markets, are spreading fast and are expected to be among the most widely used climate tools. Statement II is also correct in that governments raise revenue by auctioning emission allowances, which moves money from polluting firms to the state. But that transfer is not why carbon markets are spreading: they are favoured because they put a price on carbon and let emissions be cut wherever it is cheapest. So both are correct, but II does not explain I.
Climate Change MitigationCarbon Pricing & MarketsCarbon marketsCap-and-tradeCarbon creditsPrivate sectorState resources