Read the passage and mark the letter A, B, C or D on your answer sheet to indicate the best answer to each of the following questions from 3...

Europe’s carbon market is increasingly a high – stakes compliance arena where price signals, sector coverage, and the use of revenues help steer the clean transition—often more effectively than slogans, because firms respond to cost pressure faster than to reputation risk. Recent EU reporting describes the system as “effective and well – functioning” and points to continued emissions declines in power and industry, supported by changes in the energy mix: renewables scaling up, gas replacing coal, and coal’s share in the ETS reaching a historic low. In market terms, the carbon price acts like a pressure gauge on the dirtiest fuels, while investment decisions increasingly tilt toward lower – carbon infrastructure.

The biggest shift is not only cuts, but wider coverage. [I] Bringing maritime transport into the ETS in 2024 pulls shipping out of a climate “blind spot” and into a monitored system. [II] High first – year surrender rates are presented as a sign the system can work in practice, but the policy details—partial coverage for extra – EEA voyages, phased surrender requirements, and special rules for ice – class ships—show how the design is a negotiated balance between practicality and credibility. [III] A built – in cancellation mechanism, triggered when surrendered allowances fall short of verified emissions, serves as a backstop so under – compliance does not quietly weaken the cap. [IV]

Aviation is also being tightened through broader pricing coverage and a gradual phase – down of free allocations, while incentives for sustainable aviation fuels are framed as a targeted way to shift behaviour without waiting for perfect technology. Across sectors, the recurring tension is basic: decarbonisation has to compete with competitiveness, and policy aims to manage that trade – off rather than cause sudden disruption. This is where revenues matter beyond optics—auction proceeds are channelled into grids, storage, efficiency, heating, mobility, and dedicated funds, turning compliance costs into transition investment.

Still, credibility depends on strong rules and enforcement: monitoring, verification, cap updates, and scope changes that keep the system from becoming a paper exercise. With cap “rebasing” and further scope adjustments planned for 2026, the EU signals an instrument that is continually updated—whose legitimacy will depend on whether cuts stay measurable, truly additional, and resistant to loopholes.

[Adapted from https://www.jonesday.com/en]

Question 31: Where in the passage does the following sentence best fit?

This system is backed by reporting duties and a surrender deadline that tests real compliance rather than headline ambition.

A. [I]        B. [II]        C. [III]        D. [IV]

Question 32: The word " negotiated " in paragraph 2 is OPPOSITE in meaning to __________.

A. imposed        B. compromised        C. engineered        D. contested

Question 33: The expression “a paper exercise” in paragraph 4 is closest in meaning to __________.

A. a market – driven solution        B. a box – ticking exercise

C. a sudden policy disruption        D. a public investment programme

Question 34: The word "whose" in paragraph 4 refers to __________.

A. paper exercise         B. an instrument         C. further scope         D. cap rebasing

Question 35: According to paragraph 1, which of the following is NOT mentioned as a reason for the success of Europe’s carbon market?

A. The transition of the energy mix from coal to cleaner renewable sources.

B. The effectiveness of cost pressure in changing the behavior of companies.

C. The use of slogans as the primary tool to encourage lower – carbon investment.

D. The role of carbon pricing as a mechanism to monitor the use of dirty fuels.

Question 36: Which of the following best summarises the content of paragraph 2?

A. The shipping industry has become a climate blind spot because it successfully avoided all reporting duties in 2024.

B. The inclusion of maritime transport in the ETS illustrates a careful balance between practical policy and real compliance.

C. Ice – class ships are the main reason why the built – in cancellation mechanism fails to prevent under – compliance of the cap.

D. High surrender rates in the first year prove that headline ambition is more important than monitored systems for extra – EEA voyages.

Question 37: Based on paragraph 3, how does the EU manage the tension between decarbonisation and economic competitiveness?

A. By providing free allocations to all aviation companies to prevent any sudden disruption in the global market.

B. By waiting for perfect technology to be developed before implementing any incentives for sustainable aviation fuels.

C. By reinvesting auction proceeds into transition projects like energy grids and storage to support industry shifts.

D. By ensuring that auction proceeds are used only for optics rather than for dedicated funds or mobility infrastructure.

Question 38: Which of the following best paraphrases the underlined sentence in paragraph 3: "Across sectors, the recurring tension is basic: decarbonisation has to compete with competitiveness, and policy aims to manage that trade – off rather than cause sudden disruption."?

A. Managed trade – offs between sectors are the only way to ensure that competitiveness is not influenced by decarbonisation policy.

B. Because decarbonisation cannot compete with competitiveness, policy aims to cause sudden disruption to manage the trade – off.

C. Sudden disruption is necessary for sectors to understand that the trade – off between policy aims and competitiveness is basic.

D. Policy focuses on balancing the need for emission cuts with economic viability to avoid any abrupt shocks to the sectors.

Question 39: Which of the following can most likely be inferred from the passage?

A. The inclusion of shipping and aviation in the ETS was a simple process that required no negotiation or special policy rules.

B. The long – term effectiveness of the ETS depends on its ability to evolve through regular updates and stricter enforcement rules.

C. Carbon prices will continue to reach historic lows as long as renewables remain the most expensive part of the energy mix.

D. Most firms in the EU prioritise their reputation risk over cost pressure when making decisions about lower – carbon infrastructure.

Question 40: Which of the following best summarises the passage?

A. Europe’s carbon market is a paper exercise that relies on slogans and high surrender rates to hide the loopholes in shipping and aviation.

B. The EU ETS primarily focuses on maritime transport and ice – class ships to ensure that carbon prices act as a pressure gauge for renewables.

C. Decarbonisation is an impossible goal because auction proceeds are not enough to cover the high costs of compliance for most dirty fuels.

D. The EU ETS is an evolving and comprehensive system that uses carbon pricing and revenue reinvestment to drive a measurable clean transition.