Official Explanation1) Take a First Glance (5 seconds)
The long sentence that is almost entirely underlined is a hint to pay attention to shifting Sentence Structure.
2) Read for Meaning
The sentence is fairly dense; slow down as you read it and try to understand each piece. The sentence discusses the standard framework of cap and trade, which is fundamentally conservative. The sentence goes on to describe three things that a central body generally does in a cap-and-trade system: (1) it establishes a limit on the total amount of pollution that can be produced, (2) it allocates a certain number of permits, and (3) it allows market forces to dictate the price a company must pay to pollute.
In the original sentence, the modifier in which … pollute should logically refer to the standard framework of cap and trade, but the placement of this modifier after the words fundamentally conservative makes it sound as though in which … pollute is modifying fundamentally conservative. Eliminate answer choice (A).
3) Find a Starting Point
Start with any difference that seems easiest to you, then move to the next easiest issue, and so on. Stop when you have one answer or you aren’t sure how to address the remaining differences. All errors for each choice are detailed in the next section.
4) Eliminate (and Repeat)
(A) The placement of the modifier in which … pollute after fundamentally conservative makes it sound as though in which … pollute is modifying fundamentally conservative.
(B) In this sentence, the opening noun phrase, the standard framework of cap and trade, is the subject of the standalone sentence the standard framework … is fundamentally conservative. The middle portion, a central body establishes a limit … produced, is also a complete sentence. Essentially, there are two complete sentences mashed together without a connecting conjunction, similar to this faulty sentence: The plane ride, the seats are close together, was uncomfortable. Eliminate this choice for incorrect sentence structure.
(C) CORRECT. The dashes around the modifier a central body … pollute set it off from the rest of the sentence, indicating its role as a modifier. Mentally ignore the modifier and the correct sentence core now reads, the standard framework of cap and trade … is, fundamentally, a conservative one.
(D) The wording that comes before a colon must be able to stand alone, but the fundamentally conservative standard framework of cap and trade is fails this requirement. The verb is requires an object: the framework is…something.
(E) The modifier in which … pollute is now properly placed next to the framework of cap and trade. However, ignore that modifier to find the sentence core: the fundamentally conservative standard framework of cap and trade lacks a verb. This is a sentence fragment.