Regarding “carbon credits”, which one of the following statements is not correct?
[UPSC Civil Services Exam – 2011 Prelims]
(a) The carbon credit system was ratified in conjunction with the Kyoto Protocol
(b) Carbon credits are awarded to countries or groups that have reduced greenhouse gases below their emission quota
(c) The goal of the carbon credit system is to limit the increase of carbon dioxide emission
(d) Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme
- Carbon credits are certificates that allow their holders to emit one ton of carbon dioxide or an equivalent of another greenhouse gas, and they serve as offsets for companies that produce such gases.
- Their main objective is to reduce the amount of greenhouse gas emissions from industrial activities to mitigate global warming. Governments or regulatory bodies establish caps on greenhouse gas emissions, and some companies may find it financially impractical to reduce their emissions immediately.
- Therefore, they can purchase carbon credits to comply with the emission limits, and those who succeed in reducing their emissions may be rewarded with additional credits.
- The surpluses of credits may be sold to finance future projects aimed at reducing emissions.
- These credits were ratified under the Kyoto Protocol and validated by the Paris Agreement, which also established provisions for the expansion of carbon credit markets.
- Carbon credits can be traded on both public and private markets, and their prices are determined by supply and demand. However, as supply and demand vary among countries, credit prices fluctuate accordingly. Option 4 is incorrect.