Tuesday, July 14, 2009

"Why Warren Buffett Is Wrong About Cap and Trade: Eric Pooley" (BRK.A)

In February the NYT's Freakonomics blog had a post, "Can Newspapers Stop Global Warming?" that began:

Newspapers are disappearing faster than alpine glaciers, and a new paper by journalist-turned-public-policy scholar Eric Pooley suggests the two may be related.

Pooley’s paper argues that newspapers have failed as referees of the public debate on preventing climate change, reporting junk economics and good economics with equal weight. In these muddied waters, Pooley suggests, it’s harder for the government to push sound policy to stop global warming....
I, of course, had a comment:

“…As an example, he points to the failure, last year, of the Lieberman-Warner Climate Security Act. The bill was the most serious climate-change-prevention legislation ever to make it to the Senate….”
The reason the bill didn’t move is the floor managers couldn’t get enough Senators to put their names to the thing.
Most folks understand that the price of coal-fired electricity would have to rise two to four times for wind/solar to be competitive. That was the purpose of L-W.
Upon being sworn in, most politicians come to believe that the most statesmanlike, the most patriotic, thing they can pursue is their own re-election.
Today I linked to a CJR post suggesting that newspaper websites go dark for a week. My first thought was how many truly awful essays would be written that week.
Looks like it’s already happening.
Now I’m torn between using the phrases arrogant twaddle or errant drivel.

— Climateer
This was immediately followed by Mr. Pooley's only statement in the comments section (probably a coinkydink):

Fire away, but since many of the points made here are addressed in my paper, I’d invite anyone who’s interested to read it rather than simply responding to this necessarily brief and incomplete summary. Cheers.

— Eric Pooley
Today he writes (in Bloomberg):
Warren Buffett carries plenty of weight in any debate -- even when he gets it wrong.

So as the Senate digs into the climate-change bill that passed the House of Representatives last month, it’s worth taking a hard look at how Buffett’s views on the bill went off course.

Buffett knows global warming is real and carbon emissions must be cut. But he’s worried that the bill might hurt his electric utility, Des Moines, Iowa-based MidAmerican Energy Holdings Co.

He may be right. But that doesn’t mean this is a bad bill; it may mean MidAmerican made some bad decisions.

On another count, Buffett is simply wrong when he calls the bill a “huge, regressive tax” that would ensure “very poor people are going to pay a lot more for their electricity.” Likewise David Sokol, the chairman of MidAmerican, was wrong when he testified that the cost of buying carbon allowances under the bill would drive up Iowa electricity prices by $110 per month per customer in the first year.

Opponents of the bill have latched onto Buffett and Sokol’s words, trumpeting them on the House floor and in a July 7 Senate hearing. So let’s examine their three basic claims:

Claim 1: It’s regressive. No, the bill doesn’t punish the poor. The nonpartisan Congressional Budget Office found that it would cost the average household $175 a year by 2020, while the 20 percent of Americans with the lowest incomes would come out ahead by $40 a year.

‘Cap and Tax’

Claim 2: It’s a tax. In spite of the Republican Party’s relentless “cap-and-tax” talk, cap and trade isn’t a tax. It is a dumping fee for greenhouse gases. The dumping permits, or allowances, are distributed to utilities and other large emitters, who can then buy and sell them....MORE

As you can see, Mr. Pooley is a formidable wordsmith.

In this case though the words don't tell the whole story. He fails to mention that MidAmerican has the largest stable of utility-owned wind generated electricity in the country. He doesn't talk about MidAmerican's significant hydro capacity. Instead he ends the opinion piece with:

...Bottom line: MidAmerican made some bad calls. It turned on a huge new coal-fired plant in 2007. It chose not to spin off its wholesale power business. And when other utilities were hammering out their allocation deals with Congress, Sokol and Buffett sat out the negotiation.

The Oracle of Omaha apparently didn’t see this one coming. But it’s not too late: the next round of negotiation is just getting under way.

See also:

Warren Buffett on Cap-and-Trade (BRK.A)

Berkshire Hathaway's Munger on Cap-and-Trade ("Monstrously Stupid Right Now...Almost Demented"); Warren and Charlie on Wind and Solar (BRK.A)

Berkshire Hathaway's MidAmerican Energy on Waxman-Markey: "We Don't Much Care For It" (BRK.A)

Did Congressman Markey Attempt Witness Intimidation With the CEO of Berkshire Hathaway's MidAmerican Energy? (BRK.A)

UPDATE-- "Sokol: Markey seeks to intimidate" (BRK.A)

Berkshire Hathaway's MidAmerican Sees Carbon Trading Adding $120 to Bills (BRK.A)

Climateer Investing on Carbon Trading and Traders