Answer 1 says both statements are correct. Statement-I talks about carbon markets being a key tool in combatting climate change, which is widely accepted and evidenced by their increasing prevalence globally. Statement-II explains that carbon markets facilitate the transfer of resources from the private sector to the State. This is also generally true as carbon markets allow businesses to buy "carbon credits", essentially transferring money (resources) to projects (often state-backed) that reduce greenhouse emissions, hence, to the State.

However, there`s debate over whether statement-II is truly the correct explanation of statement-I. Although carbon markets do involve resource transfer, their most important characteristic is their task of limiting CO2 emissions by enforcing a cost on carbon emissions (cap-and-trade), which isn`t explicitly mentioned in statement-II.

So, the answer wouldn`t necessarily be incorrect if it was option 2, stating that both are correct but statement-II is not the correct explanation for statement-I. This depends on how one interprets the main function of carbon markets. Therefore, great care should be taken while drawing inferences from such statements.