Energy under stress: war, politics and the tug‑of‑war between fossil profits and the clean‑energy transition

The shock that reset the short term

A fresh conflict flashpoint in the Middle East has yanked oil markets back into crisis mode. With strikes on Iran triggering what analysts describe as the largest-ever fuel supply disruption, crude has vaulted back above $100 a barrel and pump prices have surged. The International Energy Agency (IEA) responded this week with emergency guidance that reads like a 1970s playbook upgraded for 2026: work from home where possible, car-share, lower highway speed limits, restrict urban driving on alternate days, boost public transport, avoid short‑haul flights, and shift industrial feedstocks to spare critical fuels.

These steps are not symbolic. When the IEA issued a similar 10‑point plan in 2022, it estimated demand savings on the order of 2.7 million barrels per day in advanced economies if widely adopted. The new call reflects the same logic: rapid, distributed demand cuts can stabilize markets faster than supply expansions that take months or years. In the meantime, the price spike is minting windfalls for oil and gas producers—reshaping the politics of energy overnight.

Profits soar, and so do calls to tax them

Democratic lawmakers in the United States have proposed a windfall tax on fossil‑fuel companies to claw back crisis‑driven profits and cushion households from higher energy costs. Versions of this approach are not untested. Europe’s 2022–2023 windfall and solidarity levies raised tens of billions of euros, some of which were earmarked to cap retail bills, accelerate heat‑pump deployment, and expand grid upgrades. The mechanics matter: to avoid distorting investment signals, well‑designed windfall taxes apply only to revenues above a defined baseline, sunset automatically when prices normalize, and ring‑fence proceeds for resilience and decarbonization.

Today’s case for such a tax is pragmatic as much as it is ethical. The disruption premium embedded in oil prices is a geopolitical rent, not a reward for new productivity. Recycling that rent into system upgrades—demand response, electrified transport, low‑income bill relief, and clean‑energy infrastructure—can blunt inflationary pain now while reducing exposure to the next supply shock.

Accountability under attack: the science and the courts

Even as price turmoil revives short‑term demand for fossil fuels, political and legal moves in the U.S. could weaken the long‑term guardrails that keep decarbonization on track.

• First, the administration’s directive to shut down the National Center for Atmospheric Research (NCAR) has triggered a lawsuit from a university consortium. NCAR is a backbone institution for weather and climate modeling, severe-storm forecasting, and international research. Closing it would erode the quality of the data that underpins everything from crop insurance and wildfire planning to grid reliability modeling—and, crucially, the attribution science increasingly used in climate litigation and risk disclosure.

• Second, a pivotal Supreme Court case could determine whether state courts may hear climate‑liability suits against major oil companies or whether such claims will be sidelined to federal venues that have historically proven less receptive. A ruling that walls off state consumer protection and public nuisance claims would insulate the industry from a growing wave of accountability actions, potentially slowing emissions reductions by dulling financial incentives to change.

A climate policy that simultaneously raises fossil‑fuel rents and chips away at scientific capacity and legal accountability is a recipe for entrenchment. If courts and data pipelines are weakened, the social costs of carbon remain undercounted, and the public tools that translate science into enforceable responsibility degrade.

Meanwhile, renewables sprint ahead

Against this fraught backdrop, the build‑out of clean power is breaking records. In 2025, the world added a staggering 814 GW of wind and solar capacity, according to new data. Depending on location and technology mix, that cohort can generate on the order of 1,500–1,800 TWh annually—roughly equivalent to the electricity consumption of the European Union’s residential sector. The surge is reshaping power markets, depressing wholesale prices during sunny and windy hours and intensifying the need for storage, flexible demand, and modernized grids.

The investment signal here is unambiguous: given stable policy and bankable offtake, developers can deliver scale at speed. What’s missing in many jurisdictions is not interest but enablement—fast interconnection, predictable auctions, and transmission build‑outs that move electrons from resource-rich regions to demand centers.

The tug‑of‑war: three time horizons, one system

• The immediate horizon is about shock absorption: demand restraint, emergency fuel switching, and protecting vulnerable households.
• The medium term (12–36 months) is about capacity deployment: auctions, interconnection reform, and storage and grid projects that turn variable generation into firm decarbonization.
• The long term is about institutional credibility: safeguarding climate science, preserving legal pathways for accountability, and stabilizing climate finance beyond electoral cycles.

Crises are when these horizons collide. Without careful design, short‑term measures entrench long‑term vulnerability. With the right levers, they can accelerate structural change.

Four policy levers to turn crisis into durable progress

1. Targeted windfall taxation—with ring‑fenced reinvestment

• Design: Tax only profits above a multi‑year price baseline; apply a clear sunset; disallow the use of proceeds to subsidize new fossil extraction.
• Use of proceeds (domestic):
  • Immediate bill relief tied to efficiency retrofits so households save beyond the crisis.
  • Heat pumps and building electrification for low‑income homes, paired with weatherization.
  • Distribution‑grid upgrades and transformer capacity to handle EV charging and rooftop solar.
  • Firming capacity: competitive procurements for grid‑scale batteries, demand response, and virtual power plants.
• Use of proceeds (international):
  • Contributions to loss‑and‑damage and climate adaptation funds, focused on early‑warning systems and resilient power in climate‑vulnerable countries.

2. Protect the science that protects the public

• Enact statutory independence and multi‑year appropriations for core climate and weather institutions (e.g., NCAR partnerships, national meteorological services, satellite observation programs).
• Guarantee open data and international collaboration protocols to maintain model quality and disaster‑risk forecasting.
• Link research funding to operational needs: grid‑relevant climate downscaling, compound‑risk modeling for heat, drought, and wildfire, and climate‑attribution services that inform insurance and infrastructure design.

3. Safeguard climate litigation and transparency

• Preserve state‑court jurisdiction over consumer protection, fraud, and nuisance claims related to climate damages, ensuring communities can seek redress where statutes exist.
• Strengthen anti‑SLAPP protections so researchers, journalists, and public agencies can communicate climate science without intimidation.
• Expand corporate climate‑risk disclosure with standardized, comparable metrics, scenario analysis, and board‑level accountability—so investors can price transition and physical risks accurately.

4. Accelerate clean‑energy auctions and grid delivery

• Scale up auction volumes and cadence with bankable tenors and contracts‑for‑difference that hedge price risk while driving competition.
• Run joint auctions for renewables plus storage to procure clean, dispatchable capacity and reduce curtailment.
• Pre‑permit and zone sites with environmental safeguards to cut lead times while protecting biodiversity and communities.
• Reform interconnection: cluster studies, shared upgrades, and cost‑allocation rules that reflect system benefits.
• Build transmission: fast‑track region‑spanning lines with benefit‑cost frameworks that account for resilience and congestion relief, not just energy delivered.

What good looks like in the next 12 months

• Rapid implementation of IEA‑style demand measures with clear performance metrics (e.g., weekly oil‑use reductions, transit ridership gains, telework participation) and sunset clauses.
• Passage of a temporary, baseline‑based windfall levy with 100% of proceeds legally dedicated to the measures above, audited quarterly, and published on a public dashboard.
• An emergency science stabilization act that funds NCAR‑linked programs and guarantees continuity of critical weather and climate services.
• A judicial and legislative commitment to keep climate‑related consumer protection and public‑nuisance cases in appropriate state venues, paired with support for courts to handle complex scientific evidence.
• A surge of auctions: governments commit to multi‑year schedules that at least double 2023–2024 tender volumes, with grid operators publishing interconnection roadmaps and shovel‑ready zones.

Don’t waste the crisis

There’s a temptation in energy crises to think tactically and defer strategy. But the past year shows the system can do both. Emergency IEA measures can shave demand within weeks; windfall taxes can recycle geopolitical rents within months; and auctions can lock in gigawatts for delivery within a few years. Meanwhile, undermining climate science and court‑based accountability would do lasting damage far beyond this price cycle.

The central lesson is straightforward: volatility is not a bug of fossil‑fuel dependence—it is a feature. Each geopolitical shock shifts wealth from consumers to producers and from importers to exporters. The only durable hedge is structural: electrify end uses, power them with renewables, backstop with storage and flexible demand, and ground all of it in independent science and enforceable accountability. Even in a year of war and political whiplash, the world still installed 814 GW of wind and solar. With the right policy levers, the short‑term fossil resurgence can be the last gasp before a more stable, cleaner energy system takes hold.