Taxation of Carbon Offset Certificates, Continued

Our post on the potential tax consequence of carbon offset gift certificates in Oscar gift bags has drawn a bit of attention in the blogosphere, with the TaxProf and Glenn Reynolds of Instapundit taking note.

Adam Stein, a co-founder of TerraPass, provided a gracious response in the comments section, and in the interest of fairness, we’ll elevate his points here.

First of all, let me say that I’m impressed with the digging you’ve done into the numbers. Most people pay little attention to the underlying economics of carbon reductions, and we at TerraPass always appreciate a good, numbers-based analysis.

The Academy was very well aware of the $600 gift limit. The total cost of the sculpture and carbon came to $575 per recipient.

As you note, the sculpture retails for $650. You’d have to raise the price to about $785 if you also wanted the full 100,000 lbs of CO2 reductions. This figure is close to what the Academy paid, but is obviously a bit higher. Why the discrepancy?

The answer is probably pretty obvious, but you always get a better deal on something when you buy wholesale in bulk. If you’re in the market for 100 glass sculptures and 10 million lbs of CO2, please give us a call. I’m sure we can work something out.

It is quite an attractive sculpture, to be sure.

In a follow-up e-mail, Adam says he doesn’t know the answer to the question as to how the IRS is handling the taxable value of the carbon certificates: “I mean, it’s not like you can actually transfer ownership of the carbon credits to someone else, because you never take possession of them yourself. TerraPass buys them and retires them on your behalf. It’s an interesting question, but you’d need to consult a tax lawyer to get a definitive answer.” Fair enough. Adam adds that the Academy wasn’t going to take any chances, so they kept the purchase size below the allowed limit.

Interestingly, the commercial purveyors of carbon credits place substantialy different pricetags on the same amount of carbon purportedly being offset. Ecobusinesslinks conducted a price survey (available here), which shows a metric ton of carbon dioxide going for anywhere from $3.56 to $39.48. Well, now, that’s quite a range.

Do carbon offsets really make a difference? Conservation, tree-planting and clean-energy projects like methane farms are laudable ventures, but feel-goodism aside, is there a real impact on energy supply or the environment? It’s a much-debated topic. We’ll leave it to The Economist’s bloggers to handle the discussion today.

Join the discussion One Comment

  • Guy Lane says:

    The scepticism about rouge used carbon salesmen is appropriate. However, it is clear that quality carbon offsets can be beneficial to the planet particularly if the offsets are for greenhouse emissions that have no optional greenhouse reduction strategy. A case in point is air travel. If you do travel by air then it is appropriate to offset the emissions. For this reason Uncook carbon offset have been designed as a quality product with highly additional projects administered through the respected Greenhouse Gas Abatement Scheme. See for more information.