Berkshire Hathaway 2013 Annual Meeting Audience Question # 44

Warren doesn’t think climate change will affect the year to year assessment of insurance rates

Warren Buffett:

OK. Andrew.

Andrew Ross Sorkin:

OK, Warren. We got a couple of questions related, this year, to climate change and its impact on the company.

So let me ask this question from Clem Dinsmore, who asks: “If asked, what would the underwriting experts at your casualty insurance and reinsurance companies advise you and your fellow board members are the emerging risks to Berkshire’s many enterprises from the changes in extreme weather associated with climate change?”

And I would add that Jed McDonald asked a separate question, but related, saying, “What are your thoughts on the price on carbon debate?”

Warren Buffett:

Yeah. Well, as you’ve noticed if you’ve been here the last few years, the climate really is getting a lot warmer.

Obviously… well, Charlie knows far more about science than I do, which is not saying a whole lot, but the… my general feeling is that there is a… certainly a reasonable chance… that people that are worried about warming and the effect of CO2, et cetera, are right.

But I don’t know enough so that I can say that, you know, that I can speak as any kind of an expert on it.

I don’t know the answer on it, but I certainly am willing to assume that… there are a lot of very smart people who think that, and I think that it’s a reasonable assumption.

I don’t think that it makes any real difference in assessing insurance rates from year to year.

We have a general tendency to be pessimistic in our assumptions about the likelihood of natural catastrophes, but we would have that general bias, which I think is useful, regardless, if there were no carbon emissions of any kind going on.

We would still assume that whatever the past history had been of natural disasters, we would assume that they were going to be somewhat worse.

And the global warming, in terms of resetting prices of insurance from year to year, is not a real factor.

Our general pessimistic bias is something of a factor.

The second part about pricing of carbon emissions, do you want to repeat that again?

Andrew Ross Sorkin:

The full question… and I abbreviated it… was, “What are your thoughts on the carbon… the price of carbon… debate?

“Do you think it’s a feasible way, for example, to incentivize efficiency improvements and capture the externalities of carbon’s damaging effects, or is it a lofty, idealized concept too tricky to figure out in practice?”

Warren Buffett:

I would say that the question calls for having Charlie give the answer.

Charlie Munger:

Well, you’ve got to realize that I’m a Caltech-trained meteorologist, but that was before they’d invented most of modern meteorology.

I think that I think that carbon trading is pretty impractical, a whole bunch of nations with different ideas, and so on.

And I think if you’re going to change habits, the correct answer is carbon taxes.

I think Europe, because they’re socialists and wanted to tax the thing the people needed the most, they put these big high taxes on motor fuel. So they did it by accident, and not because it was a good idea, vis-a-vis global warming and a lot of other issues, but because they really needed the money.

But I think they stumbled into the right policy. I think the United States should have way higher taxes on motor fuel, and that’s efficient.

Some group of shareholders, though. They like clapping for high taxes.

Warren Buffett:

They weren’t all clapping.

Looking for an offline, PDF copy of all shareholder questions carefully arranged into specific topics such as How to properly evaluate a company for potential investment, Intelligent Investing and Secrets to achieving Success and Happiness? Click on the image below to learn more.

Q&A with Warren Buffett and Charlie Munger: A Compilation of All Shareholder Questions and Answers from The Berkshire Hathaway Annual Shareholder Meetings

Click here to return to the Q&A topic list. Alternatively, you can proceed to the next or go back to the previous question.

Don`t copy text!