UPSC Prelims 2011 Q15: Environment & Ecology – Climate Change & Greenhouse Gases
- (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
Answer: (d) Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme
Explanation
Carbon credits: finding the one incorrect statement
Carbon credits are permits that let a holder emit a set amount of greenhouse gas; they emerged from the Kyoto Protocol's market mechanisms.
| Option | Verdict | Reason |
|---|---|---|
| (a) The carbon credit system was ratified in conjunction with the Kyoto Protocol | Correct | Carbon trading mechanisms (like the Clean Development Mechanism) came from the Kyoto Protocol, 1997 |
| (b) Carbon credits are awarded to countries/groups that reduce emissions below their quota | Correct | Reducing emissions below one's assigned limit earns tradeable credits |
| (c) The goal is to limit the increase of carbon dioxide emissions | Correct | The system exists to create a financial incentive to cut CO₂ |
| (d) Carbon credits are traded at a price fixed from time to time by UNEP | Incorrect | Carbon credits are traded on open markets, with prices set by supply and demand, not fixed by the UN Environment Programme |
Carbon credit market basics:
| Point | Detail |
|---|---|
| Origin | Kyoto Protocol, 1997 |
| Mechanism | Cap-and-trade; exceed your cap and buy credits, beat it and sell credits |
| Price | Set by market trading, not a fixed UNEP rate |
Answer: (d) Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme.
Why each option is right or wrong
- (a) Incorrect. This statement is true; the carbon credit system is linked to the Kyoto Protocol, so it is not the answer to 'not correct'.
- (b) Incorrect. This statement is true; credits go to those who cut emissions below their quota.
- (c) Incorrect. This statement is true; limiting CO₂ growth is the system's stated goal.
- (d) CORRECT. Carbon credit prices are market-determined, not fixed periodically by UNEP; this is the one incorrect statement, and so the answer to this 'not correct' question.
Key point
Carbon credits: born from the Kyoto Protocol; earned by cutting emissions below quota; aim to curb CO₂ growth; prices are set by MARKET trading, not fixed by UNEP.
Remember
Carbon credit price = market-set, not fixed by UNEP.
Common mistakes
- Missing that this is an 'is NOT correct' question and picking a true statement instead.
- Assuming a UN body must fix the price of any UN-linked mechanism.
- Not knowing carbon credits trade like commodities, with market-driven prices.
Exam tip
Whenever a price or rate is said to be 'fixed by' a body in these questions, check if it is really market-determined — that is usually the false statement.
Sources
- United Nations — Kyoto Protocol to the United Nations Framework Convention on Climate Change (1997), Articles 6, 12 and 17
- World Bank — State and Trends of the Carbon Market 2010