Correct Option (1)
Statement 1 is correct. The passage explicitly states that "All actions to address climate change ultimately involve costs" and that "Funding is vital for countries like India to design and implement adaption and mitigation plans and projects." It further highlights "the scale and magnitude of the financial support required by developing countries to enhance their domestic mitigation and adaptation actions." This directly indicates that climate change necessitates significant financial outlays for developing nations, thereby impacting their domestic finances.
Incorrect Options:
Statement 2 is incorrect. The passage discusses the financial implications of climate change, the need for funding for adaptation and mitigation, and the responsibility of developed countries for financial support. However, it does not mention or imply any impact of climate change on the capacity for multilateral trade of developing countries. The scope of the passage is limited to financial aspects related to climate action.