Q. Consider the following statements:
1.Carbon credits are designed to create financial incentives for countries and companies to reduce their greenhouse gas emissions by allowing them to trade emission permits.
2.Carbon credits are voluntary, while carbon offsets are mandatory.
3.In a cap-and-trade system, if a company exceeds its allocated carbon credits, then the company is forced to shut down operations immediately.
How many of the statements given above are correct?
Explanations –
Statement 1 is correct. Carbon credits are part of a system, such as cap-and-trade, where companies are given permits (credits) to emit a certain amount of greenhouse gases. If they emit less than their allocated amount, they can sell the excess credits to other companies, creating a financial incentive to reduce emissions.
Statements 2 and 3 are incorrect. Carbon credits are typically part of mandatory regulatory systems like cap-and-trade programs, whereas carbon offsets are often voluntary mechanisms that companies or individuals use to compensate for their emissions. Further, carbon credits are government-issued permits, while offsets represent emission reductions. In a cap-and-trade system, if a company exceeds its allocated credits, it is not forced to shut down immediately. Instead, the company must purchase additional credits from other companies or face penalties.
Source: The Hindu
