Consider the following statements regarding Carbon Pricing:

Question

Consider the following statements regarding Carbon Pricing:

I. Carbon pricing is a policy tool that puts a financial cost on greenhouse gas emissions, primarily methane.

II. It works by making emitters pay for the environmental damage caused by their pollution, encouraging them to reduce emissions.

Which of the statements given above is/are correct?

1. A. I only
2. B. II only (Correct answer)
3. C. Both I and II
4. D. Neither I nor II

Correct Answer

Option B — II only

Detailed Solution & Explanation

The correct answer is II only.

Key Points

• Statement I is incorrect — carbon pricing is a policy tool that assigns financial cost to ALL greenhouse gas emissions (primarily CO₂, not primarily methane).
• Methane is one of many covered gases but is not the primary focus.
• Statement II is correct — by making emitters pay for environmental damage, carbon pricing creates economic incentives to reduce emissions.
• Only Statement II is correct.