Attractive Production Tax Credits

“We wouldn’t do it without the production tax credit we get.” That’s what Warren Buffett said about his holding company Berkshire Hathaway’s US$30 billion investment in wind turbines and infrastructure in the State of Iowa through one of its companies, Berkshire Hathaway Energy (BHE)

- Owen Skae

In a December 2019 feature in the Financial Times by Robert Armstrong, Buffett in his role as Chair of Berkshire Hathaway’s Board, explained that the company’s motive to turn Iowa into “the wind capital of the world, the Saudi Arabia of wind” was not motivated by moral reasons of “doing good” in society by turning away from fossil fuels. They invested in wind because the government paid them to do so in the form of an attractive tax credit that made it a strong investment proposition.

Responding to this, Armstrong wrote: Another kind of capitalist would go on to say that moving from fossil fuel to renewable energy reflected the responsibility of his companies to society, a matter of “doing well by doing good”. Such is the current corporate consensus, expressed– sincerely or not–in annual reports and advertisements by companies across the globe.

Some people might be tempted to argue that Buffett’s view echoes that of Milton Friedman who stated that the only social responsibility of a company is to make profits. I wouldn’t be too hasty. My view is that Buffett is a person of the highest integrity who is honest enough to state that business can’t be moral arbiters.

“What makes them think they know better?” he asked. Knowing better smacks of arrogance. Applying an ethical mindset in the best interests of the company, however, results in the best decisions, and that is precisely the case with BHE.