Consider the following statements: Statement-I: Carbon markets are likely to be one of the most widespread tools in the fight against climate change. Statement-II: Carbon markets transfer resources from the private sector to the State. Which one of the following is correct in respect of the above statements?

Re-examination:

Statement-I: Correct. Carbon markets are indeed expected to be a major tool against climate change because they create a price signal for emissions and incentivize mitigation.

Statement-II: Correct in the broad policy sense. In many carbon market designs, especially compliance markets with auctioned permits or carbon-credit purchases under regulated frameworks, private firms pay for emission allowances/credits, generating public revenue or channeling funds through State-backed climate mechanisms.

Link between the two: Statement-II can explain Statement-I because carbon markets not only reduce emissions through pricing but also mobilize financial resources for climate action via regulatory systems.

Option check:

• (a) Correct: Both statements are correct, and Statement-II is taken as an explanation of Statement-I.
• (b) Not preferred as UPSC treats Statement-II as explanatory.
• (c) Wrong after re-examination: Statement-II is not entirely incorrect.
• (d) Wrong: Statement-I is clearly correct.