Q. Regarding "carbon credits", which one of the following statements is not correct? (UPSC Prelims 2011)
Answer:
Carbon crodits are traded at a price fixed from time to time by the United Nations Favironment Programme
Notes: Option [D] is Incorrect. Carbon credits are treated like a commodity. They are traded on various stock exchanges and specialized carbon markets (like the European Union Emissions Trading System or the Intercontinental Exchange).
- Market Forces: If a company or country finds it very expensive to reduce its own emissions, the demand for credits goes up, and the price rises.
- No Central Fixer: While the UN sets the rules for the system (through agreements like the Kyoto Protocol or the Paris Agreement), it does not act as a price-setting body.
Analysis of the Correct Statements
- [A] Correct: The carbon credit system was indeed formalized and ratified under the Kyoto Protocol in 1997.
- [B] Correct: One carbon credit is generally equivalent to one tonne of carbon dioxide (or its equivalent in other greenhouse gases) that has been prevented from entering the atmosphere.
- [C] Correct: The fundamental goal is to put a "cap" on emissions. By making it expensive to pollute and profitable to save carbon, the system aims to limit the overall increase in global CO2 levels.