[Solved] Consider the following statement 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?

Q73. Consider the following statement

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?

1. Both Statement—I and Statement-II are correct and Statement-II is the correct explanation for Statement—I
2. Both Statement—I and Statement—II are correct and Statement—II is not the correct explanation for Statement—I
3. Statement—I is correct but Statement II is incorrect
4. Statement—I is incorrect but Statement—II is correct

Answer: 2

Carbon Markets:

Carbon Markets in Climate Action:

Carbon markets are considered one of the most widespread tools to fight climate change. They create economic incentives for reducing greenhouse gas emissions, promoting cleaner technologies, and improving energy efficiency. Hence, Statement I is correct.

Principle of Carbon Pricing:

Carbon markets operate on the principle of carbon pricing, assigning a financial value to CO2 emissions.

The creation of a market for trading carbon credits allows companies to buy and sell permits for emissions.

Economic Incentives for Emission Reduction:

The goal of carbon markets is to provide economic incentives for reducing greenhouse gas emissions.

Companies that can lower emissions efficiently can sell their surplus permits to those facing higher costs for reduction.

Market-Driven Emission Reduction:

By putting a price on carbon, these markets encourage cleaner technologies, promote investments in renewable energy, and incentivize emissions reduction across various sectors.

Resource Transfer:

Carbon markets do transfer resources from the private sector to the state in some cases. For instance, when companies purchase emissions permits or pay for carbon credits from government-controlled schemes, resources are transferred to state authorities. This revenue can be reinvested in cliStatement Imate initiatives or public goods.

Hence, Statement II is also correct.