Regarding "carbon credits", which one of the following statements is not correct?

The correct answer is D. Carbon credits are not priced by the United Nations Environment Programme. Each credit stands for one tonne of carbon dioxide equivalent reduced or avoided, and its price is set by demand and supply in carbon markets such as the EU Emissions Trading System, or in bilateral and voluntary markets. No UN body announces a fixed rate.

Why the other options are right:

• A: The credit mechanism took shape under the Kyoto Protocol (adopted 1997, in force 2005) through its flexible mechanisms: emissions trading, Joint Implementation and the Clean Development Mechanism.
• B: Countries with Kyoto targets were allotted assigned amounts. A country that emitted less than its quota could sell the surplus, which is the basis of the credit.
• C: The system is a cap-and-trade design. Its purpose is to restrict or limit the growth of greenhouse gas emissions.

For Mains, this links to climate finance and India's own carbon market. The Energy Conservation (Amendment) Act, 2022 gave the legal basis for India's Carbon Credit Trading Scheme, which is a change since the exam year. The Paris Agreement (2015) also revised the market framework under Article 6.

Trap: Because the UN runs the Kyoto process, aspirants assume it also fixes carbon prices. Carbon credit prices are market-driven.