Billionaire investor Warren Buffett appears seriously confused about the risks posed by greenhouse gases. Two years ago, the sage of Omaha wrote, “Doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society.” Duh.
But now the AP reports:
Berkshire Hathaway shareholders reject a measure that would have required the company’s utilities to set goals for reducing greenhouse gas emissions.
At the company’s annual meeting on Saturday several people spoke in favor of the measure, saying Warren Buffett’s company could be hurt financially by potential liabilities associated with carbon emissions. Berkshire owns several utilities through its MidAmerican Energy Holdings subsidiary.
Investment manager Bruce Herbert of Newground Social Investment says investors should be concerned.
Buffett and Berkshire’s board, which collectively controls 38 percent of the voting power, opposed the measure, so it was overwhelmingly rejected.
Buffett says he doesn’t believe greenhouse gases represent a material risk for Berkshire’s insurance operations. And Berkshire’s major utilities are governed by state regulators who might object to changing sources of electricity, he said.
I’d love to find out exactly what he said, if anybody knows someone who was there. I can’t find any more details on the Web.
The utility excuse is just lame. Yes, utilities are subject to regulators, but the regulators are heavily influenced by the wishes of the utility — and a combination of efficiency, demand response, wind (and other renewables), and some storage and natural gas can sharply reduce GHGs without raising bills, especially when phased in over extended period of time, which is the point of the shareholder measure.
Buffett is famously a long-term investor and hard to imagine a graver long-term risk than GHGs. Other insurance companies understand the risk, like Munich Re (see “The only plausible explanation for the rise in weather-related catastrophes is climate change“):
Floods in central Europe, wildfires in Russia, widespread flooding in Pakistan. The number and scale of weather-related natural catastrophe losses in the first nine months of 2010 was exceptionally high”¦. Munich Re emphasises the probability of a link between the increasing number of weather extremes and climate change.
Globally, 2010 has been the warmest year since records began over 130 years ago, the ten warmest during that period all falling within the last 12 years. The warmer atmosphere and higher sea temperatures are having significant effects. Prof. Peter H¶ppe, Head of Munich Re’s Geo Risks Research/Corporate Climate Centre: “It’s as if the weather machine had changed up a gear. Unless binding carbon reduction targets stay on the agenda, future generations will bear the consequences.”
Buffett’s 2009 NYT op-ed “The Greenback Effect,” makes clear he understands global warming is nonlinear “” and thinks enough people might understand that point so he can use it as a springboard for discussing monetary policy:
IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.
[Yes, Buffett may be confusing CO2 emissions with CO2 concentrations -- join the club -- but it's impossible to tell from this short hit.]
So now we are back to questioning Buffett’s sagacity on this crucial issue:
- Why Warren Buffett Is Wrong About Cap and Trade
- Gates and Buffett to invest in tar sands and spawn more two-headed fish?
- Gates Foundation strategy raises key question: Can the problems of the developing world be solved by ignoring global warming?
- 2011 annual Letter from Bill Gates silent on climate change
- Who else have Nathan Myhrvold and the Groupthinkers at Intellectual Ventures duped and confused? Would you believe Bill Gates and Warren Buffett?
Previous in TP Climate Progress
Language Intelligence: Lessons on persuasion from Jesus, Shakespeare, Lincoln, and Lady Gaga
Could it be that the BH Board was influenced by their recent purchase of Burlington Northern Railroad, which specializes in delivering coal? That’s a more likely explanation than Warren Buffet’s need for more money, though this certainly plays a role as well.
The facts of global warming’s effects on insurance company risks are less important in BH’s business plans. Their actuaries can just raise the insurance rates, and they like the increased cash flow anyway.
I’m getting a little sick of all of these people who think that their bankrolls are at the center of the world, especially since a middle class life in the US provides all of the comforts any normal person could ever need.
From 5/01/11
“Natural disasters in Australia, New Zealand and Japan may cost Berkshire Hathaway $1.67 billion in insurance claims for property damage, CEO Warren Buffett said Saturday. That’s even before the hurricane season arrives.
Buffett estimated Berkshire’s share of damage from flooding in Australia at $195 million, the earthquake in New Zealand at $412 million and the earthquake and tidal wave in Japan at $1.07 billion.”
BUT
“Buffett said it’s doubtful that the insurance premiums Berkshire collects this year will outweigh the damage claims it will have to pay out.”
http://www.omaha.com/article/20110501/MONEY/705019869
Just keep those premiums high Warren.
Either age, ego, or ignorance has caught up with the ‘Sage’ of Omaha. Like a great many rich of the second ‘Gilded Age’ his ideas will sink like the rich on the Titanic.
Buffett is an old man, and a capitalist. What happens to humanity in 2020, let alone 2050, is irrelevant. A capitalist, and Buffett is a successful one, is required by the nature of that system, and the laws and obligations that it has enshrined to facilitate its actions, to only be interested in profit maximisation and capital accumulation. All else that exists under heaven is an externality, of no interest until it interferes with the two prime requirements.
Peter M #3, the rich did not, unless they volunteered to do so, sink with the Titanic. That privilege was reserved, in the main, for the rabble of steerage passengers. I’m certain that today’s rich Master envisage just such a triage, based on wealth, in the near future-this time for the whole of humanity, as our Titanic, human civilization, careers straight into the icebergs dead ahead.
Buffett famously arranged to turn management of his moulah over to Gates Charities on departure. He doesn’t think leaving relatives a fortune serves their best interests. Statements like that one should help his family realize he hasn’t forgotten them completely. He’s still serving them up a giant steaming heap of climate trouble. Thanks Gramps!
http://www.hutchnews.com/Print/kansasheat
The study from The Nature Conservancy finds temperatures in Kansas, Nebraska and other High Plains states could climb 10 degrees Fahrenheit over present-day levels by the year 2100, and as much as 5 to 7 degrees for most of western and central Kansas by 2050.
Even if there were to be a curbing of greenhouse emissions globally over the next century, the study projects, Kansas temperatures could still rise more than 6 degrees, with most of that rise occurring within the next 40 years.
Warren Buffet may not deny the risk induced by climate change, but the importance of the impact on BH’s operations. That’s not the same, but would need a serious explanation.
From a “tragedy of the commons” perspective and from a “profit maximization” perspective it probably makes sense that profits in insurance will not be affected by the relatively small emissions of Buffet’s utilities. It also seems likely to me that global insurance companies will be able to keep raising ther premiums enough to make profits in the face of increasing risks
We really can’t count on for profit corporations to make voluntary efforts to reduce the rate of climate change.
I don’t understand the confusion you’re under.
There are two statements in what WB reportedly said, in response to ‘……. a measure that would have required the company’s utilities to set goals for reducing greenhouse gas emissions.’:
1 “Buffett says he doesn’t believe greenhouse gases represent a material risk for Berkshire’s insurance operations.”
2 “Berkshire’s major utilities are governed by state regulators….”
‘Material risk’ in reinsurance depends on whether you’re charging the right premium for what happens, having sufficient reserves for that to average out over several years, and being reasonably diversified so the outliers (say, Fukushima or Katrina) don’t get you. If climate-induced reinsurance losses increase, so will premia.
Re his utilities, they are heavily regulated long-term fixed assets – and he points out in the 2010 Annual Report that he has more wind capacity than any other US utility.
Before criticising what he does, or what he has reportedly said, I suggest looking at http://www.midamericanenergy.com/environment2.aspx which is the Environment tab of the Berkshire utilities holding company, and comparing what he does to what his peers do?
[JR: He fought the climate bill and yes, I'd love to know exactly what he said, but for now, what he is reported to say makes little sense.]
Au contraire, what he is reported to have said makes perfect sense. He never said GHGs don’t represent a risk, he said they don’t represent “a material risk for Berkshire’s insurance operations.” And given the context in which he is said to have spoken, a shareholder vote on a motion, we can complete his sentence with the word ‘profitability’.
Similarly Peter Hoeppe in your Munich Re post you link to didn’t say or imply that Munich Re was threatened by increased risk as a result of increasing weather event-related claims. He merely said there would be more of them.
[JR: But GHGS represent a material risk for his utilities. He seems to have ducked that point.]
It sounds to me, being strictly shareholder-meeting about it, that if Buffett had said that GHGs represented a material opportunity for Berkshire’s insurance operations that might also make perfect sense, and you might well agree.
Ah yes, the twin demons of the elderly: dementia and alzheimers.