Correct Option (D):
Statement 4 is not correct. The price of carbon credits is determined by market forces of supply and demand within established carbon markets, such as the European Union Emissions Trading System (EU ETS) or various voluntary carbon markets. It is not fixed by the United Nations Environment Programme (UNEP) or any other UN body. UNEP's role involves promoting environmental sustainability and providing policy guidance, not regulating commodity prices.
Incorrect Options:
Statement 1 is correct. The carbon credit system, encompassing mechanisms like the Clean Development Mechanism (CDM), Joint Implementation (JI), and Emissions Trading, was established as a key component of the Kyoto Protocol, which was adopted in 1997. These mechanisms provide market-based incentives for reducing greenhouse gas emissions.
Statement 2 is correct. Carbon credits represent a measurable, verifiable reduction in greenhouse gas emissions, typically equivalent to one tonne of CO₂. They are awarded to countries, entities, or projects that reduce their emissions below an agreed-upon baseline or assigned quota. These credits can then be sold to other entities that exceed their emission limits.
Statement 3 is correct. The primary goal of the carbon credit system is to create an economic incentive for reducing greenhouse gas emissions, particularly carbon dioxide (CO₂). By assigning a monetary value to emission reductions, the system aims to limit the overall increase of CO₂ and other greenhouse gases in the atmosphere, thereby contributing to climate change mitigation.