A carbon credit is a permit that allows the holder to emit one ton of carbon dioxide or an equivalent amount of a different greenhouse gas.

• Statement A is correct: The carbon credit system was formalized under the Kyoto Protocol (1997) to provide a market-based mechanism for countries to meet their emissions targets.
• Statement C is correct: The fundamental objective of the system is to reduce or limit the overall emission of greenhouse gases, particularly CO2, to mitigate climate change.
• Statement D is correct: Credits are issued to entities that reduce their emissions below a specified quota or baseline. These credits can then be sold to others who exceed their limits.
• Statement B is incorrect: The price of carbon credits is not fixed by the United Nations Environment Programme (UNEP) or any other international body. Instead, it is determined by market forces of supply and demand within carbon trading markets (such as the EU Emissions Trading System).