Carbon Credit and Carbon Trading Mechanism

Carbon Credit and Carbon Trading (UPSC Prelims + Mains)

Imagine a cement factory in Rajasthan and a steel plant in Odisha. Both release carbon dioxide (CO2) while making products we use every day. Now imagine the government says: "You must reduce pollution. If you reduce more than your target, you can earn a tradeable certificate. If you reduce less, you must buy certificates from others." This is the basic idea behind carbon credits and carbon trading.

For UPSC, this topic is important because it connects environment, economy, industry, energy, international agreements (Kyoto Protocol and Paris Agreement), and India's new domestic carbon market steps. Questions can come in Prelims as direct concepts, and in Mains as policy analysis: "Is carbon trading effective?", "How should India design its carbon market?", "How does it impact industry and development?"

Carbon Trading

Carbon trading is the buying and selling of carbon credits or emission permits in a market. It is used to reduce emissions at lower cost. Those who can reduce emissions cheaply do more and sell credits. Those who cannot reduce easily buy credits to meet targets.

Offset

A carbon offset means reducing emissions in one place to compensate for emissions in another place. For example, a company may buy credits from a biogas project to offset its own emissions. Offsets are common in voluntary markets and also existed under Kyoto mechanisms.

Carbon Tax

A carbon tax directly puts a tax (price) on CO2 emissions. For example, a fixed rupees-per-tonne tax. It gives a stable carbon price, but emissions may or may not fall to a fixed target unless the tax is adjusted.

1) What Does "1 Carbon Credit = 1 Tonne CO2" Really Mean?

When we say 1 carbon credit equals 1 tonne of CO2, we mean this:

• If a project reduces emissions by 1 tonne compared to what would have happened normally, it can claim 1 carbon credit.
• If a project removes 1 tonne of CO2 from the atmosphere (for example, through long-term carbon storage), it can also claim 1 credit if rules allow it.

Example in simple numbers:

• A landfill normally releases methane. A project captures methane and uses it for energy. The climate benefit is calculated in CO2e. If the benefit equals 10 tonnes CO2e, the project can earn about 10 credits.
• A factory reduces coal use and saves emissions of 5 tonnes CO2. It can earn about 5 credits if it is eligible under a crediting system.

Important UPSC point: A carbon credit is not a physical "coin". It is a certificate recorded in a registry. The registry ensures the credit is not counted twice and can be tracked from issue to trade to final use.

2) Carbon Trading Basics: Buyers, Sellers, and How the Market Works

Carbon trading works like a market for "pollution rights" or "pollution reductions". In simple terms:

• Sellers: Those who reduce emissions more than required or those who create approved emission reduction projects.
• Buyers: Those who need credits to meet mandatory targets (compliance) or those who want credits to meet voluntary climate commitments.

2.1 Two main carbon units

• Allowances / Permits: Government gives a right to emit up to a limit under a cap. Trading happens under cap-and-trade systems (example: EU ETS).
• Credits / Offsets: Projects earn credits by reducing emissions compared to baseline. Trading happens under crediting mechanisms (example: CDM under Kyoto, and voluntary carbon market projects).

2.2 How cap-and-trade works (step-by-step)

Think of it like a school rule on plastic waste:

• The principal sets a total limit of plastic waste for the whole school (cap).
• Each class gets a limit (allowances).
• If one class uses less plastic, it can "sell" its extra limit to another class.
• Overall school waste falls because the total cap falls every year.

In industry terms:

• Regulator sets a cap or target.
• Companies measure emissions and submit reports.
• Companies must surrender allowances/credits for their emissions or shortfall.
• Trading makes compliance cheaper because reductions happen where cost is lowest.

2.3 How project-based credits work (offset logic)

In this system, the main question is: "How much did the project reduce compared to what would have happened?"

• Baseline emissions are estimated.
• Actual emissions are measured.
• Difference becomes emission reductions, then credits.
• Credits are traded and finally "used" (retired).

2.4 What makes a carbon market trustworthy?

• Clear rules: who can earn credits, who must buy, what counts as reduction.
• Strong MRV: accurate measurement and independent verification.
• Registry: prevents double counting and shows credit life cycle.
• Enforcement: penalties for cheating and non-compliance.
• Transparency: public data builds trust in the market.

3) Kyoto Protocol Mechanisms: CDM, JI, and Emissions Trading

The Kyoto Protocol (under UNFCCC) created the first large international carbon market structure. It introduced three "flexibility mechanisms" to help countries meet emission targets at lower cost.

3.1 The three Kyoto mechanisms

UPSC linkage: Many Prelims questions directly ask which mechanisms belong to Kyoto Protocol. The answer is CDM, JI, and emissions trading.

4) Clean Development Mechanism (CDM) and India's Participation

CDM was created because developed countries had binding emission targets under Kyoto, but they wanted cheaper options. Developing countries, like India, did not have binding targets under Kyoto's first commitment period. CDM allowed a "win-win" idea:

• Developed countries get cheaper emission reductions (credits).
• Developing countries get investment, technology, and sustainable development co-benefits.

4.1 How CDM works (simple flow)

1. Project idea: Example: wind farm, biomass power, methane capture, energy efficiency.
2. Baseline: What emissions would happen without the project?
3. Additionality test: Would the project happen without CDM money? If yes, credit quality is doubtful.
4. Validation: A third-party checks project design.
5. Registration: Project gets registered under CDM system.
6. Monitoring: Actual emission reductions are measured.
7. Verification and issuance: Verified reductions become CERs.
8. Trading: CERs can be sold and used for compliance or voluntary cancellation.

4.2 India's participation in CDM (data + meaning)

India was one of the largest host countries for CDM projects. A key reason was India's large energy sector, fast industrial growth, and many renewable and efficiency opportunities.

In a government reply in Parliament (Rajya Sabha, 2021), it was stated that 1,686 CDM projects from India were registered with the CDM Executive Board, and about 265 million CERs were issued to Indian projects.

This shows two important UPSC points:

• India has experience in project-based carbon crediting.
• Carbon finance can become a revenue stream if projects are real and verified.

4.3 Indian CDM case studies (real examples you can write in answers)

Case Study 1: Gujarat Fluorochemicals (HFC-23 destruction)

• HFC-23 is a very powerful greenhouse gas created as a by-product in refrigerant manufacturing.
• A CDM project used thermal oxidation (safe burning) to destroy HFC-23 instead of releasing it.
• This was among the earliest industrial gas CDM projects linked to India and became widely discussed in carbon market history.
• UPSC learning: Some industrial-gas CDM projects created very large credits but also raised concerns about market distortions. This is an example for "criticisms of carbon markets".

Case Study 2: Delhi Metro Rail Corporation (DMRC) and CDM

• Urban mass transport reduces emissions by shifting people from private vehicles to metro.
• DMRC has been associated with CDM-related projects and also renewable energy initiatives (like solar PV).
• UPSC learning: Carbon credits can support cleaner public transport, but measurement and methodology must be sound.

Case Study 3: Renewable energy projects (wind, biomass, small hydro)

• India had many wind and small hydro projects seeking CERs.
• Bagasse cogeneration in sugar mills is another typical CDM category (using agricultural waste for power).
• UPSC learning: Renewable projects are good climate actions, but "additionality" can be debated once renewables become mainstream and profitable.

4.4 What went wrong with CDM prices?

CDM created many credits, but demand reduced over time due to changes in climate policy and oversupply of low-cost credits. Carbon credit prices fell sharply, which reduced incentive for new CDM projects.

UPSC angle: Carbon markets need stable long-term policy and high-integrity credits. Otherwise, they can become weak and unreliable for climate action.

5) Voluntary vs Compliance Carbon Markets

For UPSC, it is very important to clearly differentiate these two.

5.1 Compliance market (mandatory)

• Created by a law or regulation.
• Covered entities must meet targets.
• Non-compliance leads to penalty.
• Examples: EU ETS, many national ETS systems, and India's emerging compliance mechanism under Carbon Credit Trading Scheme.

5.2 Voluntary market

• No legal compulsion. Companies buy credits to meet voluntary goals like "carbon neutral", "net-zero", or CSR branding.
• Quality depends on standards, MRV, and transparency.
• Risk of greenwashing is higher if credits are low quality or claims are unclear.

5.3 Comparison table

6) EU ETS (European Union Emissions Trading System) as a Model Example

The EU ETS is the world's most famous compliance carbon market and is often used as a model in policy discussions. It started in 2005 and works on cap-and-trade.

6.1 How EU ETS works (simple explanation)

• The EU sets a cap on total emissions for covered sectors.
• Companies receive or buy allowances (often called EUAs).
• Each year, companies must surrender allowances equal to their verified emissions.
• If a company emits less, it can sell extra allowances. If it emits more, it must buy allowances.
• The cap reduces over time, so total emissions fall.

6.2 Sectors covered (high value UPSC fact)

• Electricity and heat generation
• Energy-intensive industry (like steel, cement, chemicals)
• Aviation (in the system since 2012, with coverage changes over time)
• Maritime transport has been included in recent reforms (EU has expanded coverage)

6.3 Phases of EU ETS (easy table)

6.4 What India can learn from EU ETS

• Strong MRV is essential. Without accurate emissions data, trading becomes meaningless.
• Cap must tighten over time to create real reductions.
• Price volatility can happen. Many systems use stabilising tools.
• Carbon leakage risk: if industries move to countries with weaker rules, jobs and emissions shift. EU uses free allowances and other measures to reduce leakage risk.
• Policy linkages: carbon markets work best when combined with renewable policy, efficiency rules, and clean technology support.

7) India's Market-Based Climate and Energy Initiatives (Before Carbon Trading)

India did not start from zero. India already used market-based instruments in energy and renewables. These experiences matter because carbon trading needs the same backbone: targets, measurement, certificates, registry, and trading platform.

7.1 Perform Achieve and Trade (PAT) Scheme Explained (Very Important)

PAT stands for Perform, Achieve and Trade. It is an energy efficiency scheme implemented by the Bureau of Energy Efficiency (BEE) under the Energy Conservation Act.

How PAT works (simple classroom language)

• Some big industries are called Designated Consumers (DCs) because they consume a lot of energy (like steel plants, cement plants, thermal power plants, refineries, fertiliser units, etc.).
• Each DC gets a target to reduce Specific Energy Consumption (SEC), meaning energy used per unit of product.
• If a DC reduces energy more than the target, it gets Energy Saving Certificates (ESCerts).
• If a DC fails to meet the target, it must buy ESCerts from others to comply.
• ESCerts are traded on power exchanges. This creates a market incentive for energy efficiency.

PAT in one example

A cement plant uses 100 units of energy to make 1 tonne of cement. The target is to bring it down to 95. If it reaches 93, it saves more than required. It earns ESCerts, sells them, and gains money. Another plant that reaches only 98 must buy ESCerts to meet compliance.

UPSC link: PAT is not exactly "carbon credit trading", but it is a similar market-based approach. Many experts see PAT as a stepping stone because energy saving reduces emissions too.

7.2 Renewable Purchase Obligation (RPO) and Renewable Energy Certificate (REC)

India also has a market-based system in renewable energy. Here are the two key terms:

• RPO: Obligated entities (like discoms, open access consumers, captive users) must purchase a certain percentage of electricity from renewable sources.
• REC: A certificate that represents the "green attribute" of renewable electricity. One REC is commonly treated as equivalent to 1 MWh of renewable electricity.

Why REC is needed?

• Some states have plenty of wind/solar resources, some do not.
• REC helps a state or company meet RPO even if renewable power is not easily available locally.
• RECs can be traded on exchanges, which creates a national renewable market signal.

UPSC clarity: REC is not a carbon credit. It is a renewable electricity attribute certificate. But both systems show how "certificates + trading" can push environmental goals.

8) India's Carbon Credit Trading Scheme 2023 (CCTS) and Indian Carbon Market

India has started building a domestic carbon market framework through the Carbon Credit Trading Scheme (CCTS), 2023. The idea is to create an Indian Carbon Market where carbon credits can be issued and traded in an organised way.

8.1 Why India needs a domestic carbon market

• To meet climate commitments by reducing emissions in industry and energy sectors.
• To reward cleaner production and encourage investment in efficient technology.
• To prepare Indian industry for global carbon-related trade measures (like carbon border measures) by improving carbon accounting and efficiency.
• To mobilise private finance for emission reduction projects.

8.2 Key features (what UPSC expects)

• Carbon Credit Certificates (CCCs): These are the tradeable units under the Indian scheme. In general understanding, 1 CCC represents 1 tonne of CO2e reduction or removal.
• Two mechanisms: A Compliance Mechanism and an Offset Mechanism.
• Institutional structure: A national steering body, an administrator, and a registry to track credits.

8.3 Who does what? (Institutional roles)

• Bureau of Energy Efficiency (BEE): Works as the Administrator of the scheme. It supports design, implementation, sector coverage, targets, issuance of certificates, and overall functioning.
• Registry (Grid India / Grid Controller of India): Maintains records of carbon credits, ownership, and transactions, and helps prevent double counting.
• National Steering Committee: Provides overall guidance and oversight for the Indian Carbon Market framework.

8.4 Compliance Mechanism (easy explanation)

In the compliance mechanism, certain sectors or entities can be given emission-related targets. Entities that over-achieve may earn certificates. Entities that under-achieve may need to buy certificates.

This is similar in spirit to:

• EU ETS (cap-and-trade approach)
• PAT scheme in India (target + certificate + trading)

Key point: Compliance markets work only when targets are clear, MRV is strict, and penalties are real.

8.5 Offset Mechanism (easy explanation)

In the offset mechanism, carbon credits can be generated by projects such as:

• Renewable energy
• Waste-to-energy and methane capture
• Energy efficiency projects
• Forestry or ecosystem restoration (if allowed under rules)

These project credits can then be used by buyers. However, strong MRV and safeguards are needed so that one reduction is not counted twice (for example, once by India's national target and again by a company abroad).

8.6 Why BEE's role is crucial

BEE already has experience with:

• Setting targets (PAT targets for industries)
• Issuing certificates (ESCerts)
• Working with auditors and monitoring systems
• Supporting trading through organised platforms

This experience can help India's carbon market avoid beginner mistakes and build credibility.

9) Carbon Pricing: Carbon Tax vs Cap-and-Trade

Carbon pricing means putting a cost on emitting greenhouse gases. Two major approaches are used worldwide.

9.1 Carbon Tax

• Government fixes the price per tonne of CO2.
• Companies pay tax based on emissions.
• Simple to understand and implement if emissions data is available.
• But emissions reduction is not guaranteed unless tax is adjusted to reach targets.

9.2 Cap-and-Trade (ETS)

• Government fixes total emissions (cap) or target level.
• Market decides the price based on demand and supply of permits/credits.
• More certainty on emissions outcome, but price can be volatile.

9.3 Comparison table (very useful for Prelims + Mains)

UPSC writing tip: In Mains, do not say "one is better always". Instead say: "Both can work. Choice depends on data quality, enforcement capacity, and political economy."

10) Benefits of Carbon Trading (Why People Support It)

Carbon trading is supported because it tries to reduce emissions without blocking economic activity. It uses market logic.

10.1 Major benefits

• Cost-effective reductions: Emissions reduce where it is cheapest to reduce first.
• Innovation push: Companies invest in cleaner technology to avoid buying credits.
• Creates a carbon price signal: Pollution is no longer "free".
• Mobilises finance: Money flows to green projects like biogas, renewable energy, and clean transport.
• Supports India's green growth: Encourages efficiency in steel, cement, power, and other big sectors.
• Helps competitiveness: Better carbon accounting and efficiency can support exports in a world moving towards low-carbon supply chains.

10.2 Indian context benefits

• Industry gets incentive to improve energy efficiency (already proven by PAT experience).
• Waste management projects (like biomethanation) get extra revenue support.
• Farmers and rural areas can benefit if projects like biogas and agroforestry are properly included with safeguards.

11) Criticisms and Problems in Carbon Trading (Why People Oppose It)

Carbon markets are not magic. If designed poorly, they can become a "paper game" instead of real climate action.

11.1 Key criticisms

• Weak additionality: Credits may be given to projects that would happen anyway.
• Double counting: Same reduction counted by two different parties.
• Greenwashing: Companies may buy cheap offsets and continue polluting, while claiming "carbon neutral".
• Local pollution not solved: Carbon trading targets CO2, but local pollution like SO2, NOx, and PM may remain if not regulated separately.
• Price volatility: Carbon price can rise or fall sharply, creating uncertainty.
• Equity and land rights issues: Forest and land-based offsets can harm local communities if consent and benefit-sharing are weak.
• Permanence problem: Forest carbon can be reversed by forest fire, pests, or future cutting.

11.2 How to make carbon markets better (Way forward points for Mains)

• Build strong MRV systems, digital measurement, and strict verification.
• Use conservative baselines and strong additionality tests.
• Ensure transparent registry and public tracking of credits.
• Protect community rights in forestry projects, ensure benefit-sharing.
• Limit the use of offsets for compliance so companies also reduce their own emissions.
• Align the domestic carbon market with India's national climate targets to avoid accounting confusion.

12) Carbon Offset Projects in India (Examples You Can Use)

Carbon offset projects reduce emissions outside the buyer's direct operations. India has many offset opportunities. Below are important categories and Indian examples.

12.1 Renewable energy

• Solar parks, rooftop solar, wind farms, small hydro, biomass-based power.
• Example writing point: wind farms in coastal Tamil Nadu and Gujarat, solar in Rajasthan, biomass in sugar belts of Maharashtra and Uttar Pradesh.
• Challenge: once renewables become mainstream and financially attractive, additionality becomes harder to prove.

12.2 Waste management and methane capture (very strong climate benefit)

• Methane capture from landfills, biomethanation plants, sewage treatment improvements.
• Indian example: Indore's wet waste to Bio-CNG model under Swachh Bharat discussions is often cited as a best practice for reducing methane emissions and producing clean fuel.
• Co-benefits: less landfill fires, better air quality, compost for farmers, fuel for buses.

12.3 Clean cooking and rural energy

• Improved cookstoves, biogas plants, solar lanterns.
• Co-benefits: reduces indoor air pollution, reduces fuelwood pressure on forests, improves women's health.
• Risk: monitoring is difficult because it involves household behaviour and long-term use.

12.4 Industrial process emission reductions

• Examples include destruction of high global-warming gases (like HFC-23) and industrial efficiency improvements.
• Benefit: very high climate impact per unit reduction.
• Risk: policy changes can affect crediting, and some projects faced criticism for creating wrong incentives.

12.5 Clean transport and public transport

• Metro systems, electric buses, modal shift projects, regenerative braking, energy-efficient rolling stock.
• Example writing point: metro projects are often used as examples of low-carbon urban development.

12.6 Forestry, agroforestry, and ecosystem restoration

• Afforestation, reforestation, agroforestry, mangrove restoration (blue carbon), restoration of degraded land.
• Co-benefits: biodiversity protection, soil conservation, water regulation, livelihoods.
• Risks: permanence, leakage (deforestation shifts elsewhere), and community rights issues.

12.7 Summary table of project types

13) REDD+ and Forest Carbon: How Forests Link to Carbon Markets

Forests absorb CO2 from the atmosphere and store it in biomass and soil. When forests are cut or degraded, stored carbon returns to the atmosphere. That is why forests are central to climate policy.

13.1 What REDD+ includes

• Reducing emissions from deforestation
• Reducing emissions from forest degradation
• Conservation of forest carbon stocks
• Sustainable management of forests
• Enhancement of forest carbon stocks

13.2 Indian context (how to write in UPSC answers)

• India has forest policies and afforestation programmes that support carbon sinks.
• Forest carbon projects must be designed carefully with safeguards because forest land often has community dependence.
• REDD+ needs strong forest data systems, reference levels, and transparent benefit sharing.

13.3 Challenges in forest carbon

• Permanence: forest carbon can be reversed due to fire or future land use change.
• Leakage: stopping deforestation in one area can shift it to another area.
• Rights and consent: projects must respect forest rights and local livelihoods.
• Measurement: requires satellite + ground data, periodic monitoring, and verification.

14) India's Position in Global Carbon Markets

India's position can be explained in three phases:

14.1 Phase 1: Strong CDM participation (Kyoto era)

• India hosted a large number of CDM projects and earned CERs.
• India gained experience in project documentation, verification, and carbon finance.

14.2 Phase 2: Price fall and weaker global demand

• Carbon credit prices fell due to oversupply and reduced demand in some markets.
• Many projects lost interest because returns were low.

14.3 Phase 3: Domestic carbon market building (present direction)

• India is building a domestic carbon market under Carbon Credit Trading Scheme framework.
• India wants to use carbon trading to support its own development pathway and climate commitments.
• India must balance: selling credits globally vs using reductions domestically for national targets.

UPSC angle: India generally supports climate finance and fair rules, while also protecting development space. In carbon markets, India often stresses integrity, fairness, and avoiding discrimination against developing countries.

15) Future Outlook and Challenges for India's Carbon Trading

15.1 Opportunities

• Large potential for emission reductions in steel, cement, power, MSMEs, and transport.
• Waste management and methane reduction can create high-quality credits.
• Green hydrogen, industrial decarbonisation, and energy storage can become major future areas.
• Forest and land restoration can support carbon sinks if safeguards are strong.

15.2 Key challenges

• MRV capacity: India needs reliable emissions data for many industries.
• Market integrity: must avoid fake or inflated credits.
• Coordination: carbon market links power, industry, environment ministries and regulators.
• Fairness: small industries must not be crushed by compliance costs; support and transition measures are needed.
• Claim clarity: avoid misuse of voluntary credits for misleading "net-zero" marketing.

15.3 What UPSC expects in "Way Forward"

• Strengthen digital MRV and verification ecosystem.
• Create clear sector-wise trajectories and transparent methodologies.
• Ensure registry transparency and prevent double counting.
• Link carbon trading with energy efficiency, renewable targets, and clean technology support.
• Build strong safeguards for forestry and community-linked projects.

16) Previous Year Questions (PYQs)

17) 10 MCQs with Explanations (UPSC Practice)

MCQ 1

In most carbon markets, one carbon credit commonly represents:

• A) 1 tonne of coal saved
• B) 1 tonne of CO2 (or CO2e) reduced/removed
• C) 1 megawatt of electricity generated
• D) 1 hectare forest area

Answer: B

Explanation: The basic unit is usually 1 tonne CO2 or 1 tonne CO2e reduced or removed, recorded as a tradeable credit.

MCQ 2

Which of the following are Kyoto Protocol flexibility mechanisms?

• A) CDM, JI, Emissions Trading
• B) REDD+, Green Credit Programme, Paris Stocktake
• C) Montreal Protocol, Basel Convention, Ramsar Convention
• D) CBD, UNCCD, CITES

Answer: A

Explanation: Kyoto introduced three market mechanisms: Clean Development Mechanism, Joint Implementation, and Emissions Trading.

MCQ 3

In a cap-and-trade system, if a company emits more than its allowance, it usually must:

• A) Shut down immediately
• B) Buy allowances/credits from the market or pay penalty
• C) Export products only
• D) Plant trees compulsorily in its factory campus only

Answer: B

Explanation: The system allows trading. If emissions exceed allowances, the company must purchase units or face penalties as per rules.

MCQ 4

The Clean Development Mechanism (CDM) mainly allowed:

• A) Annex I countries to undertake projects only in Annex I countries
• B) Annex I countries to finance emission reduction projects in developing countries and earn CERs
• C) Developing countries to impose carbon tax on developed countries
• D) Only forestry projects to earn carbon credits

Answer: B

Explanation: Under CDM, developed countries could invest in developing countries and get Certified Emission Reductions.

MCQ 5

Which statement best explains "additionality" in carbon credits?

• A) The project reduces emissions compared to baseline and would not happen without carbon finance support
• B) The project is located near an additional river
• C) The project is done only in capital cities
• D) The project uses additional labour

Answer: A

Explanation: Additionality is about "extra" reductions beyond business-as-usual, a key requirement for credible credits.

MCQ 6

EU ETS is best described as:

• A) A carbon tax system fixed by one flat price
• B) A cap-and-trade emissions trading system
• C) A biodiversity treaty
• D) A plastic waste rule

Answer: B

Explanation: EU ETS is a compliance cap-and-trade market where allowances are traded and surrendered against emissions.

MCQ 7

In India, the PAT scheme mainly targets:

• A) Increasing forest cover in all districts
• B) Reducing specific energy consumption in energy-intensive industries through targets and certificate trading
• C) Increasing gold imports to reduce trade deficit
• D) Banning all fossil fuels immediately

Answer: B

Explanation: PAT is an energy efficiency mechanism for designated consumers, using ESCerts as tradeable units.

MCQ 8

Renewable Energy Certificates (RECs) are mainly used to:

• A) Meet Renewable Purchase Obligation (RPO) requirements
• B) Measure rainfall and monsoon
• C) Replace carbon credits in Kyoto Protocol
• D) Issue driving licences for EVs

Answer: A

Explanation: RECs are market instruments to help obligated entities meet RPO when direct renewable procurement is difficult.

MCQ 9

Which of the following is a major criticism of low-quality carbon offset markets?

• A) They always reduce local air pollution fully
• B) They can lead to greenwashing if companies buy cheap credits and avoid real emission cuts
• C) They increase forest biodiversity automatically
• D) They reduce ocean currents

Answer: B

Explanation: If integrity is weak, offsets can become a "license to pollute" and harm trust in climate action.

MCQ 10

REDD+ is mainly related to:

• A) Increasing coal production
• B) Reducing emissions from deforestation and forest degradation and enhancing forest carbon stocks
• C) Increasing plastic production
• D) Managing earthquakes

Answer: B

Explanation: REDD+ is a forest-based climate mitigation approach linked to avoiding deforestation and improving carbon storage through sustainable forest management.