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No sign of California economic decline, but environmental risks threaten sustained growth, economist says

While a growing chorus among U.S. economists is warning that soaring inflation and oil prices plus global instability could put recent economic growth into reverse, a UC Berkeley expert gave a much rosier outlook for the California economy at a Santa Rosa conference Thursday. But he warned of a bigger threat from environmental decline.

“California is recession proof, and our local economy is not going to tank,” said UC Berkeley economist David Roland-Holst, Ph.D., speaking at a Sonoma County Economic Development Board conference at the Luther Burbank Center for the Arts.

The conference theme was climate change and its impact on our economy. Roland-Holst is a professor in the Department of Agriculture and Resources Economics and a leading authority on economic forecasting and its relationship to the environment.

“I’m bullish on the Sonoma County economy,” he told the more than 170 business, civic and community leaders attending the event. “The good news is — so far — I don’t see an economic decline, and signs don’t point to one happening here due to the war in Eastern Europe. However, the (Federal Reserve is) not going to let interest rates move too high and has already started pulling back on the (inflation) accelerator with a series of quarter point increases this year.”

He said the Fed is still expected to expand the money supply and that the state of California has a government budget surplus, largely due to several initial public offerings of stock that led to a tech boom in the state amid the COVID crisis.

Nationally, some forecasters are taking a view in line with New York Fed President William Dudley, who called a recession “virtually inevitable,” but a majority of economists said it is unlikely over the next year, according to the Associated Press. Mitigating the economy’s slide into retreat, those experts said, is a hot job market, strong corporate profits, ample household savings and low personal debt. High unemployment historically has been one hallmark of recessions.

The bad news for California, Roland-Holst said, is it needs to face risks from use of fossil fuels upsetting a delicate chemical balance in the atmosphere. He pointed out that conventional energy use for electricity production and transportation creates over 80% of greenhouse gas (GHG) emissions.

His presentation included an assessment of climate risk, how we got where we are today and where we are going.

Since the 1950s, Roland-Holst said, global fossil carbon emissions by fuel type show an increase in terms of billions of tons of carbon per year from petroleum present in the atmosphere, producing a surprising hockey-stick shaped graph rising from 2 billion metric tons in 1950 to over 9 metric tons by 2000. In 2000, historical temperature up-and-down cycles showed a marked rise in global temperatures – a trend that continues today.

Projected impacts of climate change, according to the state of California, can affect the food supply, water, ecosystems and potentially lead to extreme weather events with the risk of abrupt and major irreversible changes including rising intensity of storms, forest fires, droughts, flooding, heat waves and rising sea levels.

Roland-Holst offered this example of such impacts: Average sea levels in San Francisco Bay rose at a steady annual rate from 1900 to 2000. The rate of acceleration is a concern. A 1-meter sea rise would be enough to flood major portions of San Francisco International Airport.

The number and frequency of California wildfires, drought areas and the severity of these events is another worrisome factor.

“Growth has been good for material living standards and expanded rapidly with globalization. But as incomes rise, the intensity of resource consumption rises even faster, challenging our assumptions about sustainability,” Roland-Holst said. “As a result, we face substantial risks from climate change, but this can also be seen as a new agenda for economic stimulus.”

He said several mitigation measures can be taken to begin to reverse these trends in California:

  • Shift electric power to renewables (30% of GHG emissions).
  • Electrify transportation (40%).
  • Electrify buildings (15%).
  • Convert industry to electricity and hydrogen (10%).
  • Reduce waste and recycle biomass (5%).

Sonoma County policymakers and businesses should consider adaptations including investments in efficiency of resources such as energy and water, in “climate resilience,” and in people.

“While these mitigation steps may not stop global warming, they can create jobs, improve air quality and further give California technology leadership,” he said.

Roland-Holst's research focuses on development, agriculture and international trade. He has authored six books and over 100 articles.

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