Concept:
Carbon monoxide (CO) is a colourless, odourless, and highly poisonous gas produced due to incomplete combustion of fuels.
It is hazardous because it combines readily with haemoglobin in blood to form carboxyhaemoglobin (COHb), thereby reducing the oxygen-carrying capacity of blood.
\[
\boxed{
\mathrm{CO + Hb \rightarrow COHb}
}
\]
Carbon monoxide has approximately \(200\) to \(250\) times greater affinity for haemoglobin than oxygen.
Step 1: Understand the harmful effect of CO.
When inhaled,
\[
\mathrm{CO}
\]
replaces oxygen from haemoglobin, preventing oxygen transport to body tissues.
This may cause headache, dizziness, unconsciousness, and even death.
Step 2: Identify the correct reason.
Hence,
\[
\boxed{\text{Carbon monoxide is hazardous because it combines with haemoglobin}.}
\]
Therefore, the correct option is
\[
\boxed{(C)\;\text{Combines with hemoglobin}.}
\]