Is Buffett really betting on climate change? Or coal?

Freight trains could get a boost when carbon is correctly priced. But what happens when coal is the cargo?


Andrew Leonard
November 4, 2009 7:04AM (UTC)

Yes, not one, but two posts on Warren Buffett's decision to plow $26 billion into purchasing the entirety of Burlington Northern Santa Fe railroads, lock, stock, and barrel.

Because this is too much fun.

First, we have UCLA economist Matthew Kahn theorizing, in "Carbon Pricing Will Help Warren Buffett Get Rich From Investing in Railroads" that Buffet's railroad play is really a climate change bet.

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Did you know that freight trains have a fuel economy of 400 MPG? That's better than a freight truck. You don't have to be Jimmy Hoffa to anticipate that Mr. Buffett's bet on shipping logistics will be more likely to payoff in a carbon constrained world where carbon is priced.

OK, but, wait a minute. Blogging at Reuters, John Kemp says the name of the game is coal.

Warren Buffett's acquisition... looks like a strategic bet that America's future energy needs will be met, in large part, through a massive expansion in coal-fired power generation coupled with carbon capture and storage (CCS).

Coal is the most important item moved on BNSF's railroads. It accounted for almost half the tonnage moved by BNSF in the first nine months of the 2009 (214 billion revenue ton miles out of a total of 444 billion) and a quarter of the company's revenues ($2.7 billion out of a total of $10.4 billion).

Hmmm. Carbon sequestration technology is not, by anyone's estimation, ready for a large-scale roll out. Seems to me that the bet that properly priced carbon will boost railroad freight doesn't work so well when what the railroad happens to be carrying is a whole lot of coal.

Maybe Buffett just likes playing with trains?


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Energy Global Warming How The World Works U.s. Economy

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