UPSC Prelims Practice Questions — What the BRICS carbon market partnership needs

Q1. With reference to the design of emissions trading systems, consider the following statements: Which of the statements given above is/are correct?

  1. In a cap-and-trade system, the regulator fixes the total quantity of allowances, while trading among covered entities determines their price.
  2. An intensity-based system gives the regulator certainty, in advance, about the total emissions of the entities it covers.
  3. In an intensity-based system, the effective ceiling on total emissions can be known only after the actual output of covered entities is known.
  • A. 2 and 3 only
  • B. 1 and 3 only
  • C. 1 only
  • D. 1, 2 and 3

Q2. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Parties to the Paris Agreement can cooperate under its Article 6 without trading any carbon credits at all.
  2. Article 6 of the Paris Agreement requires every transfer of mitigation outcomes between Parties to pass through the centralised mechanism established under Article 6.4.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q3. With reference to India's Carbon Credit Trading Scheme, consider the following statements: Which of the statements given above are correct?

  1. An obligated entity that brings its emission intensity below its notified target becomes eligible to earn carbon credit certificates.
  2. Entities not covered by intensity targets can voluntarily register emission-reduction projects to earn carbon credit certificates.
  3. Because targets are set in terms of emission intensity, an obligated entity cannot earn certificates in a year in which its absolute emissions rise.
  4. An obligated entity that falls short of its target can meet its obligation by surrendering certificates acquired from others.
  • A. 1, 2, 3 and 4
  • B. 2, 3 and 4 only
  • C. 1 and 2 only
  • D. 1, 2 and 4 only

Q4. A sector is covered by an output-based emissions-intensity scheme. In a given year its output grows by 10 per cent and its intensity benchmark is tightened by 5 per cent. If every covered entity exactly meets the new benchmark, total emissions from the sector will:

  • A. remain at the previous year's level
  • B. fall by about 4.5 per cent
  • C. rise by about 4.5 per cent
  • D. fall by about 5 per cent

Q5. Under a cooperative approach in terms of Article 6.2 of the Paris Agreement, Country X transfers emission reductions achieved on its territory to Country Y, which uses them towards its own NDC. Which one of the following is required so that the reductions are not double counted?

  • A. X adds the transferred quantity to its emissions balance when tracking its own NDC
  • B. Y adds the transferred quantity to its emissions balance when tracking its own NDC
  • C. X also counts the reductions towards its own NDC as they occurred on its territory
  • D. Y gets the reductions certified by the Article 6.4 Supervisory Body before using them

Q6. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Linking two emissions trading systems tends to bring their allowance prices closer together.
  2. Once systems are linked, entities in the higher-priced system can meet their obligations with the cheaper units of the other system, shifting demand between the two markets.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q7. Consider the following assertion: Under the EU's Carbon Border Adjustment Mechanism, Indian steel and aluminium exporters may face pressure on the prices they receive for their EU sales. Which of the statements given below support/supports the above assertion?

  1. EU buyers facing CBAM costs on imported goods may seek price cuts from suppliers to keep their landed cost competitive.
  2. The CBAM covers fertilisers, electricity and hydrogen in addition to steel and aluminium.
  3. EU buyers can turn to suppliers whose goods carry lower embedded emissions and therefore attract smaller CBAM charges.
  • A. 1 only
  • B. 1, 2 and 3
  • C. 2 and 3 only
  • D. 1 and 3 only