What Warren Buffett Really Thinks AboutClimate Change
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When Warren Buffett appeared on CNBC's "Squawk
Box" Monday morning, his comments on how weather
disasters have affected the insurance businesses he
owns set commentators abuzz across the Internet,
especially around whether climate change has had any
impact or not.
Though it's difficult to say with any certainty what the
famed investor and CEO of Omaha, Neb.-based
Berkshire Hathaway Inc. thinks on the topic, he has
dropped hints in recent years that he agrees with the
science behind human-caused global warming.
In a 2009 New York Times op-ed, Buffett wrote that
"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."
But that hasn't stopped many observers from
portraying his comments in the "Squawk Box"
interview as a smackdown of climate change and its
impact on natural disasters, as this commenter posted
on Twitter:
As his latest annual letter to shareholders points out,
Buffett's company is one of the world's biggest
Buffett says climate change a damp squib n24.cm/1mQk6L35:00 PM - 3 Mar 2014
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investors in renewable energy like wind and solar,
including a purchase last October of two huge wind
farms in California.
Here's the segment of the interview when Buffett
discussed the risks of extreme weather events from
his perspective as an investor and owner of several
large insurance and reinsurance businesses, through
his Berkshire Hathaway holding company:
We don't mean to take the Oracle of Omaha to task,
but it's worth calling attention to a few things said in
the interview on this topic and what the facts really
are:
1) The past few years haven't seen many
hurricanes, so climate change hasn't had
an impact.
Early in the interview, Buffett was asked whether
extreme weather in recent years has changed how his
company calculates risk, specifically in its insurance
operations. Here's how he answered:
"I think the public has the impression that, because
there's been so much talk about climate, that events
of the last 10 years from an insurance standpoint in
climate are unusual. The answer is they haven't. You
read about these events, but you were reading about
events 30 or 40 or 50 years ago.
"We've been remarkably free of hurricanes in the
United States in the last five years. So if you were
writing hurricane insurance, it's been all profit. There
have been some more tornadoes than normal, but it's
not had any effect so far. The effects of climate
change, if any, have not affected ... the insurance
market."
First, here's a look at the actual number of hurricanes
and tropical storms that formed each year in the
Atlantic between 1950 and 2013, from NOAA's
National Climatic Data Center:
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As NOAA's Geophysical Fluid Dynamics Laboratory
points out here, it's premature to say that global
warming has already had a detectable impact on
Atlantic hurricanes, the storms that affect the U.S.
coastline. So Buffett isn't wrong to say we've
experienced severe weather "30 or 40 or 50 years
ago."
But while there is an emerging field of study on
whether climate change is impacting severe weather
today, most scientists who study climate focus
primarily on how events like these will change over the
long-term future – how the greenhouse-gas-fueled
heating of the planet will impact droughts, floods,
precipitation patterns and storms like hurricanes
decades from now.
Model projections by the Intergovernmental Panel on
Climate Change suggest that warming could cause
hurricanes globally to be stronger on average, with a
greater destructive potential per storm, and with
substantially higher rainfall rates than present-day
storms. (Find much more on global warming and
hurricanes here.)
2) The risk of major catastrophe is no
different today than it was a few years
ago.
Because insurance is such an important business for
Berkshire, and a major catastrophe could have a
significant impact on its earnings, CNBC's Becky Quick
pressed Buffett again on the question above. Here's
how he answered:
"I calculate the probabilities in terms of catastrophes
no differently than a few years ago," Buffett replied.
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A small pool of water is surrounded by dried and cracked earththat was the bottom of the Almaden Reservoir on Jan. 28 in SanJose, Calif. Until storms dumped several inches of rain acrossparts of California in late February, the state was experiencingits driest year in more than a century.
Though as co-host Joe Kernan was speaking over him,
he added this qualifier: "That may change in 10 years."
Buffett is famous for being very careful when
discussing investing publicly (and for refusing to make
predictions about the future), so this caveat quite
possibly was no accident. Even so, it's important to
note that catastrophic severe weather events are far
from the only things that will be impacted by climate
change.
Though they get far less attention that hurricanes and
tornadoes, longer-term climate phenomena –
especially drought and temperature changes – pose
some of the greatest risks to human societies in a
warming world.
That's because if nothing is done to control
greenhouse gas emissions in the coming years and
decades, global warming is projected to trigger
irreversible shifts in climate patterns around the
world. Where we grow certain agricultural crops will
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shift northward, and water sources that millions of
people depend on today could dry up.
For an example of how dramatically changes in
precipitation can impact water supplies, look at this
2013 vs. 2014 comparison of snowpack in the Sierra
Nevada Mountains, which millions of Californians
depend on for their drinking water, agriculture and
recreation:
Today, the global population is estimated at just over
7.1 billion by the U.S. Census Bureau. By the middle of
the century, it will likely rise to between 8 and 9 billion.
As David Titley, the director of Penn State University's
Center for Solutions to Weather and Climate Risk,
explains, this presents potentially huge problems in a
warming world.
Plentiful, reliable sources of fresh water are essential
to producing the energy we use every day, especially
for cooling nuclear, natural gas, oil and coal-fired
power plants. They're equally important to industrial
manufacturing and agriculture, by far the biggest user
of water worldwide.
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“When you’ve got that many people, it’s only natural
that you’ve got to think about where does their energy
come from," Titley said in a talk given by the American
Security Project last month. "Where does their water
come from? Where does their food come from? It
turns out that those three things are really, really
linked close together."
3) On 'apocalyptic predictions' of climate
risk: 'It hasn't been true so far.'
When Kernen asked Buffett what he thought of the
public's perception on how severe weather events had
impacted the insurance business, Buffett said this:
"I love apocalyptic predictions on it, because you're
right, it probably does affect rates. The truth is that
writing U.S. hurricane insurance has been very
profitable in the last five or six years. Now, the rates
have come down very significantly, so we aren't
writing much, if anything, in the U.S.," he said, adding
that when it comes to weather impacts on Berkshire,
"it hasn't been true so far."
Here, it's important to note that Buffett's point of view
concerns only the recent business performance of his
company, says Paul Walsh, vice president for weather
analytics at The Weather Company, the parent of The
Weather Channel.
"Warren is speaking in terms of recent history and he's
not making a specific commentary on climate change
or the future state of climate/weather related risk,"
said Walsh. "He's not in the business of making
scientific predictions – his point-of-view is actuarial
and financial."
With global warming, the climate changes that can be
expected in the long-term future will mean a world
much different than today's. Another way of saying
that is even better in Buffett's own words: "In the
business world, the rearview mirror is always clearer
than the windshield."
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