It boggles my mind that we allow GDP to not account for externalities to the environment. Like burning a wick, we cheer the flame with no consideration for the dynamite at the other end.
If we're going to include negative externalities then someone has to figure out all the positive ones too. The economic upside of cheap energy isn't being accounted for in the price either, because low prices tautologically can't capture high value per unit and flows on to people further down the value chain.
The challenge of doing so is insurmountable, that way is the madness of centralised planning.
The first order negative impact of burning fossil fuels is stuff like pollution, global warming etc. This is not accounted for by the price of these fuels.
The first order positive impacts of burning fossil fuels are accounted for in the price of the fuels. That's what people are paying for. I need to drive a car, here is some money for oil.
What you are apparently talking about are the second order positive impact of fossil fuels. Some upside due to living in an environment of abundant cheap energy. I think you will have to argue more that these second order effects are comparable in size to the first order effects.
Which reminds me; who are these people who are being hit by the pollution and aren't using fossil fuels? They aren't people in Norway; they're all living a lavish lifestyle full of stuff created with fossil fuels. That isn't a real externality. To a first approximation we're already paying for a large chunk of the price for the pollution generated on our behalf.
PostScript Whoever it is would be much better off getting more access to fossil fuels than having access curtailed. China did not become a wealthy industrial powerhouse with environmentalist policies. The argument that negative externalities are a problem is silly; clearly curtailing fossil fuel access is more damaging. Sucks to be Africa or wherever with spotty oil infrastructure and access. Whether it is technically an externality or not, it is clear that unaffected third parties would benefit from more oil, not less.
The externalities are clearly not being accounted for properly/are not net negative when curtailing a thing causes living standards overall to drop.
We are counting orders of economic effects, not orders of physical effects.
Burning fossil fuels releases CO2 and other chemicals into the air. Many of the other chemicals directly harm your health when you breath them in, so thatthis air pollution, which is a first order physical effect, is also a first order economic effect.
On the other hand, excess CO2 in the atmosphere, another first order physical effect, has no economic impacts. Breathing in an extra 50ppm of CO2 has little impact on us, perhaps a bit to plants. So the first order physical effect of excess CO2 is not an economic effect. But second order physical effect of excess CO2 is increased atmospheric temperature, which again on its has very little economic impact. Its really the third order physical effects of CO2 (higher variability in rains and seasons, storms, melting glaciers) where we really see the economic impacts (failed crops, destruction of property and human life etc). All of these things cause large direct economic damage, so that is your first order negative economic effect of fossil fuels.
> economic upside of cheap energy isn't being accounted for
It is: we anticipate companies to operate “indefinitely,” which turns to a high market value. Banks sell that stock, pension funds store it, and their activity is accounted for.
What we don’t consider (in the GDP, company valuations, bank transactions, or any metric) is how the millions of people who will survive the first mass wet-bulb death event will react.
GDP is just a measure, and it doesn’t include externalities. Any state or person is free to make up their own metric that includes it. Call it GDP_E and put it in every government report!
Saying it should include externalities is like saying that the scales at the butchers should include nutrition information with weight: that would be cool but that’s not what scales/weight measures are for.
Reminds me of the mindset of the species in Pandora's Star by Peter F. Hamilton. They basically accepted that they would die fast due to toxins / radiation / disasters for "progress" / "efficiency", and instead just focused on trucking forward and breeding like mad.
The cost of oil production in Norway is high compared to most OPEC countries, so net production will mostly flat. They can just loosen their grip a bit. The GDP would drop for nothing.
