TEXT OF INTERVIEW

Kai Ryssdal: The price of a ton of carbon lost some ground in the European carbon markets today. They actually have a climate exchange over there, where companies can buy and sell the right to pollute, in essence. Europe has what is called a cap-and-trade system. Greenhouse gas emissions are capped, that is limited, and then those pollution credits become a tradeable commodity, between industries that need 'em and companies that have pollution to spare. Cap and trade is one of the big linchpins of climate policy, using the market to control the amount of carbon in the atmosphere. But, of course, the reality is not even remotely so simple.

In this month's Harpers Magazine, Mark Schapiro spent some time trying to figure out how you verify those carbon credits. Mark, welcome to the program.

Mark Schapiro: Good to be here.

Ryssdal: The cap and trade regime has two purposes. One is actually functioning as a market. The other side of the coin, though, is the questionable part. Whether or not it actually does really reduce carbon emissions.

SCHAPIRO: Yes, let me give you an example. If a major German utility, which monitors the emissions at every one of their utilities all around Germany, and every month that company knows exactly how much over their emission cap they're going; and so whenever they reach that cap they know they have to go buy five million tons, 10 million tons, 50 million tons, 100 million tons of these things called credits.

Ryssdal: And when they need those credits they go to Brazil or some other developing economy where some entrepreneur has set up a system whereby he can promise reductions in emissions, yes?

SCHAPIRO: Yes, so that utility can then look to a developing country like Brazil, or China, or India to find a project where a developer is saying all right, I would have been emitting X amount of methane, for example. But I'm going to put in a little machine that's going to capture the methane from the landfill and therefore I'm going to reduce my emissions by X percent.

Ryssdal: He gets the credits for it, and then he sells that to the German utility and everybody is happy, yes?

SCHAPIRO: Exactly.

Ryssdal: OK, so here is what has always stumped me about a possible cap-and-trade market mechanism. It's not like you're buying and selling a pound of pork bellies here. You have this amorphous thing, this unit of carbon, it's a unit of air, as your piece talks about it. And you explain in your piece that the United Nations has set up a verification mechanism. Tell us about that.

SCHAPIRO: Yeah, my piece explores who are the people that are doing these measurements. And how reliable are these measurements? They are like the carbon accountants, they are the ratings agencies that we saw in Wall Street that assess the value of publicly-traded companies. Well, the same kind of process occurs with carbon. And what's happened, for example, is two of the biggest of those ratings agencies were actually suspended by the United Nations because of what the United Nations determined was inadequate oversight of the audits that they had conducted and inadequate technical skill levels of the people who work for them.

Ryssdal: Where does this leave us then? With the United States possibly getting into this market, and yet the underlying premise of measuring the carbon credits not being entirely reliable. I mean what happens next? I mean, this was the thing that was going to save the planet, right?

SCHAPIRO: This was the thing that was going to save the planet. The cap-and-trade system was largely designed by the United States as a way to detour around this idea of a carbon tax. So now the rest of the world was left to execute this plan, of course, when the United States left Kyoto in 2001. Now we're about to jump in. Where this leaves us is a very serious debate over how you're going to oversee this market. For example, is it going to be the Securities Exchange Commission, the Commodity Futures Trading Commission, the people who regulate utilities? And how much regulation is there going to be to ensure that the emissions that are promised are actually delivered?

Ryssdal: Mark Schapiro. He's a senior correspondent at the Center for Investigative Reporting. His piece in Harper's Magazine this month about carbon trade, and cap and trade and all that, is called "Cunning the Climate." Mark, thanks a lot.

SCHAPIRO: Thank you.