UPSC Prelims Practice Questions — CARBON CREDIT TRADING SCHEME

Q1. With reference to the institutional architecture of the Carbon Credit Trading Scheme (CCTS), consider the following: 1. The Bureau of Energy Efficiency functions as the Administrator of the Scheme. 2. Grid Controller of India (Grid-India) functions as the Registry. 3. The National Steering Committee for the Indian Carbon Market is co-chaired by the Secretaries of the Ministry of Power and the Ministry of Environment, Forest and Climate Change. 4. The Scheme is administered solely by the Ministry of New and Renewable Energy. Which of the above is/are correctly identified?

  1. The Bureau of Energy Efficiency functions as the Administrator of the Scheme.
  2. Grid Controller of India (Grid-India) functions as the Registry.
  3. The National Steering Committee for the Indian Carbon Market is co-chaired by the Secretaries of the Ministry of Power and the Ministry of Environment, Forest and Climate Change.
  4. The Scheme is administered solely by the Ministry of New and Renewable Energy.
  • A. 1, 2 and 3
  • B. 1 and 4
  • C. 2, 3 and 4
  • D. 3 only

Q2. The Carbon Credit Trading Scheme (CCTS) derives its legal authority from which one of the following?

  • A. An amendment to the Energy Conservation Act, 2001 effected through the Energy Conservation (Amendment) Act, 2022
  • B. A fresh standalone Carbon Markets Act enacted in 2022
  • C. Rules framed by the Central Government under the Environment (Protection) Act, 1986
  • D. A carbon-trading provision inserted into the Electricity Act, 2003

Q3. Consider the following statements regarding the two mechanisms under the CCTS: 1. Under the Compliance Mechanism, obligated entities that reduce their GHG emission intensity below the prescribed target are eligible for issuance of Carbon Credit Certificates. 2. Under the Offset Mechanism, non-obligated entities may register projects for GHG emission reduction, removal or avoidance. 3. The Offset Mechanism was introduced only through the amendment notification S.O. 5369(E) of December 2023. 4. Every entity operating in the notified energy-intensive sectors must register exclusively under the Offset Mechanism. Which of the above is/are correctly identified?

  1. Under the Compliance Mechanism, obligated entities that reduce their GHG emission intensity below the prescribed target are eligible for issuance of Carbon Credit Certificates.
  2. Under the Offset Mechanism, non-obligated entities may register projects for GHG emission reduction, removal or avoidance.
  3. The Offset Mechanism was introduced only through the amendment notification S.O. 5369(E) of December 2023.
  4. Every entity operating in the notified energy-intensive sectors must register exclusively under the Offset Mechanism.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 2 and 4
  • D. 1, 3 and 4

Q4. Under the Carbon Credit Trading Scheme, which one of the following is the mechanism that imposes binding, mandatory obligations on covered entities (as distinct from voluntary participation)?

  • A. The Compliance Mechanism
  • B. The Offset Mechanism
  • C. The Voluntary Carbon Market segment
  • D. The Perform, Achieve and Trade mechanism

Q5. Consider the following statements relating to the transition from the PAT scheme to the CCTS: 1. The Perform, Achieve and Trade (PAT) scheme was launched under the National Mission on Enhanced Energy Efficiency, one of the missions of the National Action Plan on Climate Change. 2. Under PAT, Energy Savings Certificates (ESCerts) were issued, each equivalent to one tonne of oil equivalent of energy saved. 3. Under CCTS, one Carbon Credit Certificate represents one tonne of carbon dioxide equivalent. 4. ESCerts under PAT were denominated in tonnes of CO2 equivalent, identical to Carbon Credit Certificates. Which of the above is/are correctly identified?

  1. The Perform, Achieve and Trade (PAT) scheme was launched under the National Mission on Enhanced Energy Efficiency, one of the missions of the National Action Plan on Climate Change.
  2. Under PAT, Energy Savings Certificates (ESCerts) were issued, each equivalent to one tonne of oil equivalent of energy saved.
  3. Under CCTS, one Carbon Credit Certificate represents one tonne of carbon dioxide equivalent.
  4. ESCerts under PAT were denominated in tonnes of CO2 equivalent, identical to Carbon Credit Certificates.
  • A. 1, 2 and 3
  • B. 2 and 4 only
  • C. 1 and 3 only
  • D. 1, 2 and 4

Q6. Under the erstwhile Perform, Achieve and Trade (PAT) scheme, an Energy Savings Certificate (ESCert) precisely represented which one of the following?

  • A. One metric tonne of oil equivalent (toe) of energy saved beyond a designated consumer's target
  • B. One tonne of carbon dioxide equivalent of emissions avoided
  • C. One megawatt-hour of renewable electricity generated
  • D. One tonne of coal substituted by a cleaner fuel

Q7. Consider the following statements comparing the two rounds of Greenhouse Gas Emission Intensity (GEI) target notifications under the CCTS: 1. The October 2025 notification set GEI targets for the Aluminium, Cement, Chlor-Alkali and Pulp & Paper sectors, covering 282 obligated entities. 2. The January 2026 notification brought a further 208 obligated entities under the compliance mechanism, taking total coverage to about 490 obligated entities. 3. The January 2026 notification reduced the total number of obligated entities below the October 2025 level. Which of the statements given above is/are correct?

  1. The October 2025 notification set GEI targets for the Aluminium, Cement, Chlor-Alkali and Pulp & Paper sectors, covering 282 obligated entities.
  2. The January 2026 notification brought a further 208 obligated entities under the compliance mechanism, taking total coverage to about 490 obligated entities.
  3. The January 2026 notification reduced the total number of obligated entities below the October 2025 level.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q8. Which one of the following bodies is the designated Administrator responsible for developing the detailed procedure and MRV framework for the Compliance Mechanism under which GEI targets are set for obligated entities?

  • A. Bureau of Energy Efficiency
  • B. Central Pollution Control Board
  • C. Grid Controller of India
  • D. Central Electricity Regulatory Commission

Q9. The Indian Carbon Market (ICM) Portal, launched at Prakriti 2026, primarily functions as which one of the following?

  • A. The central digital registry and platform for registration, validation, verification and issuance of Carbon Credit Certificates
  • B. A gateway for the collection of a carbon tax levied on industrial emitters
  • C. A stock exchange for trading the equity shares of renewable energy companies
  • D. A retail platform for individual citizens to voluntarily purchase carbon offsets

Q10. Consider the following statements comparing India's CCTS with international carbon markets: 1. India's CCTS is an intensity-based baseline-and-credit system rather than an absolute cap-and-trade system. 2. The EU Emissions Trading System operates on an absolute cap on aggregate emissions. 3. Article 6 of the Paris Agreement enables the international transfer of mitigation outcomes between countries. 4. Under India's CCTS, aggregate permissible emissions are fixed in absolute terms irrespective of output. Which of the above is/are correctly identified?

  1. India's CCTS is an intensity-based baseline-and-credit system rather than an absolute cap-and-trade system.
  2. The EU Emissions Trading System operates on an absolute cap on aggregate emissions.
  3. Article 6 of the Paris Agreement enables the international transfer of mitigation outcomes between countries.
  4. Under India's CCTS, aggregate permissible emissions are fixed in absolute terms irrespective of output.
  • A. 1, 2 and 3
  • B. 2 and 4 only
  • C. 1 and 4 only
  • D. 2, 3 and 4

Q11. Which one of the following has been designated as the market regulator for the purchase and sale of Carbon Credit Certificates on power exchanges under the CCTS?

  • A. Central Electricity Regulatory Commission
  • B. Securities and Exchange Board of India
  • C. Bureau of Energy Efficiency
  • D. Grid Controller of India