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?
The answer is (b), both Statement-I and Statement-II are correct but Statement-II is not the correct explanation for Statement-I. Statement-I is correct because carbon markets are a way of reducing greenhouse gas emissions by creating a financial incentive for businesses to reduce their emissions. Businesses that reduce their emissions can sell their emission reductions to other businesses that are not able to reduce their emissions as much. This creates a market for emission reductions, and the price of emission reductions is determined by supply and demand. Statement-II is also correct because the government can use carbon markets to raise revenue. The government can sell emission allowances, and the revenue from the sale of emission allowances can be used to fund climate change mitigation and adaptation programs. However some experts says st2 is wrong / there is no direct correlation but then lets wait for official answerkey.