The knee-jerk reaction to anything rail-related is to think “green.” And indeed, yesterday, after Warren Buffett’s Berkshire Hathaway (BNI) announced the acquisition of Burlington Northern (BNI), that rhetoric ran hot. Sure, trains are substitutes for exhaust-emitting, oil-consuming trucks.
But as The Economist notes, betting on Burlington Northern is really a bet on coal.
But while the trains themselves are among the cleanest freight transportation around, their cargo is decidedly not. Almost half of BNSF’s tonnage last year was coal, and MarketWatch estimates that some 10% of the power generated in America comes from coal hauled by BNSF.
So what does that mean, exactly? Well, Mr Buffett has other energy company holdings and has previously stated his opposition to a cap-and-trade law, which would increase the cost of electricity from coal-fired plants. In a sense, then, he’s doubling down on the carbon-intensive economy, and either betting that a cap-and-trade bill won’t pass, or acting with the intention of doing what he can to undermine the bill or secure himself some protection. On the other hand, if no climate bill passes, there remains the possibility that the Environmental Protection Agency could directly regulate stationary sources of CO2, which could conceivably be even worse for coal plants and, correspondingly, for BNSF. That possibility would make this a risky bet.
Yes, there’s a chance we could still get strict regulation of coal, but in reality the dirty energy probably has a very, very bright future. Poor economies, faced with huge foreign bills for oil, can’t resist coal. And so we won’t, and Buffett knows this.
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