It Wasn't the Carbon Tax After All

The energy transition was already speeding up. The fossil industry was already losing ground. The geopolitical moment we're in is set to speed things up. Cue the counter-spin at full throttle.

Apr 04, 2026

This post originally appeared in Alex Cool-Fergus’ Climate Memes newsletter.

Sometimes it takes a crisis to speed up a process. All signs point to this geopolitical moment as one of those times.

There has been a lot of talk recently of expanding oil and gas production from Canada to compensate for the massive amounts of oil held up in the Strait of Hormuz. Open any mainline newspaper or outlet and you’ll be assailed with a chorus of “only more Canadian oil and gas can save us!”.

I’m not buying it. Neither, it would appear, are most Canadians. When faced with dramatically rising gas prices, most of us (especially those in low-income households, who are less likely to be cushioned from inflation and price hikes) are doing the reasonable thing and cutting back on fossil fuel use where possible. Municipalities are thinking about this, as are businesses. The International Energy Agency dusted off its Ukraine war recommendations in a useful little guide for consumers and governments seeking to reduce their exposure.

These are reasonable responses to out-of-control prices. It’s also an indicator of what is to come worldwide, whether fossil fuel majors—or, heck, our own governments—like it or not.

What this means for Canada

Two contradictory things may be true. Yes, Canada is a net exporter of oil and gas. Also, that hasn’t stopped the cost of oil and gas from soaring over the past month for Canadian consumers. How much we can charge or pay for that oil, or that liquefied natural gas (LNG), depends on worldwide market supply and demand. And, much as we may dislike it, we just don’t control that—nor the prices at which fossil fuels get sold back to us.

The reality is, Canada is only ever going to be less vulnerable to price shocks when we reduce our use of fossil fuels. Not because of some wishy-washy kumbaya feelings about butterflies and vibes: the hard, cold truth is that as long as our homes are heated by, our supply chains fuelled by, our industries dependent on, and our provincial budgets addicted to oil and gas, we are always going to depend massively on global commodity prices that are out of our control.

Increasingly, on the issue of fossil fuel growth, there is a divide between what the majority of people want and need, and what fossil fuel majors are hoping for. Thereal question is which side our governments will take.

An increase in oil and gas sales, while wildly profitable for the very few, does not benefit Canadians at large.

When Alberta Premier Danielle Smith announced her budget in late February, she was anticipating a hefty deficit due to collapsing oil and gas prices. As prices rise worldwide, one would be forgiven for expecting Smith, as well as fossil majors operating in this country, to jump at the opportunity to drill for, and produce more, oil and gas.

Not so.

Despite Smith and probably many around C-suite boardroom tables breathing a sigh of relief at the increased dollars a barrel of crude can bring in, most executives are not moving to fill the gap left by the tankers blocked in the Strait of Hormuz.

And that’s because, with every oil shock, the future of the industry becomes murkier, as oil and gas-importing countries move closer and closer to cutting ties with fossil fuels. Can we blame them?

Here’s a map that shows which countries import more than half their primary energy from fossil fuels (or at least, which did in 2023):

Fossil fuel import dependency is widespread

The same analysis shows that over 40% of the world population lives in countries that spend 3% or more of their GDP on imported oil and gas. Many of those countries today face the risk not only of price increases, but of losing access to supply.

So let’s play a little game. If you were a decision-maker in a country like China, Pakistan, Germany, or the United Kingdom given the option of:

a) Facing supply challenges and cost fluctuations while you wait to source fossil fuels from another supplier; or

b) Finding another way to fuel your economy that increases your long-term security…

Which one would you take?

Energy Dominance Fever Dreams

This leaves Canada’s federal government in a bind. Of course, we can pretend to believe the United States’ energy strategy is going anywhere. That acquiescence has led mostly foreign-owned oil and gas majors operating in this country to say things like “Canada will help build fortress North America” and “we will help you achieve energy dominance”. But that is mostly because the majority of people leading those majors (and making eye-watering sums of money in the process) are… American. Elbows Up for American Billionaires!

In reality, though, the U.S. is nowhere near world energy dominance, and the war in Iran is reminding everyone how incredibly vulnerable the world’s fossil fuel sources are.

Oil and gas-friendly analysts are divided on where the price shock will lead in the medium term. This underlines the very vulnerability of provinces (or countries) linking their economic success or failure to fossil fuel royalties.

The phrase “never waste a good crisis” has been so thoroughly critiqued—with reason—that it may well have gone the route of the carbon tax and sunny ways. Especially in the context of violence so severe the population of Tehran is at risk of losing drinking water, and oil soaked acid rain is pouring from the sky.

But North American fossil fuel executives didn’t get the memo. The way markets were going before March 1, they were heading towards stranded assets and financial duress. Now money is falling into their laps.

In fact, to hear energy companies operating in Canada, as well as Energy and Natural Resources Minister Tim Hodgson, we just hit the jackpot. Yet rising tides do not lift all boats, and that is especially true when the costs of fossil fuels skyrocket.

Reading the Markets

This month, to the great disappointment of anyone who thought our federal government might still be open to facts, not fiction, the Liberal-aligned think tank Canada 2020, whose board Carney chaired until they ran his leadership bid, hosted a national energy summit that focused almost exclusively on oil and gas development. Check out the speakers lineup, and compare it to the sponsors. Though I’m sure the independent, unbiased folks from the Canada Energy Regulator and the federal Impact Assessment Agency provided reasonable arguments in favour of renewable deployment while they were wined and dined by Shell and CAPP. Wink wink.

During that conference, Hodgson was honest that Canadian oil and gas cannot be ramped up from one day to the next. At least there is that minor reality check to the industry’s claims.

Prime Minister Mark Carney may not be the climate champion many of us hoped he was before taking office, but no one can dispute his ability read the markets. He also spent much of the winter jetting around telling everyone to buckle up and join forces to resist a belligerent U.S. administration. Has he read his energy minister’s speaking notes? Hodgson sounded pretty in line with Trump, Hegseth, and Wright’s energy fever dream. I’m not sure our Middle Power™ friends in the EU and Asia would agree.

Ramping up our LNG and oil output may sound good. It definitely makes for useful talking points that grab headlines. But saying “we will fill the gap left by the tankers in the Hormuz Strait… in a couple of years” obscures the serious risk that oil-importing countries will be stuck without actual tangible supply within days.

Countries like China or EU member states won’t just park their cars or turn off the heat while they wait for Canada to build a couple of LNG terminals. What they are more likely to do is find other ways of powering their vehicles and producing electricity. Solar, wind, heat pumps, energy efficiency, and even nuclear power have just become even more appealing worldwide.

Those energy sources are safer and lower-carbon. They also can’t be turned off by the U.S. toddler-in-chief.

The Sad History of the Adorable Little Carbon Tax

A year ago, newly-minted PM Carney cancelled the much-abused carbon tax. Liberals hoping to win re-election in their ridings breathed a sigh of relief. Frankly, so did I—if only because it finally put an end to the non-stop equating of climate policy with the damn tax.

How did we make such a big deal about the carbon tax when the war in Iran—inflicted by a president who came to office promising to unleash fossil fuel production, no less—is such a clear indicator that fossil fuels themselves are the out-of-control cost item that consumers should be concerned about?

Turns out it wasn’t the carbon tax, but price gouging. Gosh, whodathunk?

Unlike where we are today, the carbon tax collected some of the money spent on fossil fuels and returned it to regular people. (Lest you think I am here to relitigate the carbon tax, let me clarify: carbon pricing had a bunch of problems that never got fixed and I’m not calling for it to make a comeback). Given the growing divide between the price gouging happening at the pumps and the extreme profits being made by fossil fuel companies operating in Canada, the federal government (or provincial, I’m not picky) has a responsibility to ensure that a proportion of that money flows back to Canadians.

So How Do We Do This?

The first, obvious step toward reducing the cost burden for Canadians is to stop subsidizing an industry that is benefitting enormously from a surprise windfall. Following through on Canada’s existing fossil fuel subsidies phaseout policy would be a great first step.

That means closing the loopholes in investment tax credits, no new money in the spring economic statement or fall budget and, for good measure, no more lending government resources to lobby on behalf of these multinational behemoths on the global stage. The back-to-back Bay du Nord photo op and CERAWeek hobnobbing (“Canada is Back!” Really?!) were a bit too on the nose.

Next, the war in Iran has led to fossil fuel companies outside the Middle East seeing much higher market values than they had before, even though they haven’t actually been able to deliver more oil and gas: it’s all vibes. The federal government would do well to capitalize on this by imposing a temporary windfall profits tax. Call it something else if you want (“freedom oil contribution”, “energy security leverage fund”, “maple leaf sovereignty investment”). But make sure it takes the excess profits—again, profits, not whatever they need to continue their regular operations—and reinvests in measures and programs that help deliver true energy security for Canadians.

The UK imposed a windfall profits tax in 2022, generating billions of dollars which were reinvested in literally anything else than private returns for a handful of billionaires. Canada came relatively close to achieving its own windfall tax, though it was ultimately kiboshed by then-finance minister Chrystia Freeland after last-minute lobbying efforts by the Canadian Association of Petroleum Producers. Shocker.

Finally, 99% of the solutions needed to shield Canadian households from rising fossil fuel prices already exist. We don’t have to wait for nuclear fusion. [Nor even the latest variant on nuclear fission—Ed.] Unsurprisingly, most of what we need requires converting all fossil-powered machines to electric motors, and widespread electrification using renewables. Sounds intense, I know, but it’s just the sum of millions of little decisions.

The federal government will be announcing an electricity strategy shortly, with supply-side measures to help deploy renewable power across the country. This is an important first step, which should be paired with demand-side management programs so every electron is used efficiently. Canada should and could be the clean energy superpower Carney and Hodgson say we are. We are already the world’s fourth-biggest renewable energy producer. We have the second-biggest sky. It should be used.

Canada can do much more, but that ambition has to be followed up with clear policy direction and capital.

Last year at this time, having just steamrolled Freeland to clinch the leadership of the Liberal Party, Carney included this idea in the Liberal policy platform (read the second one):

I don’t know who got this language into the platform, but by all accounts, Carney is a DIY kind of guy. So it’s safe to assume that if he kept it there, it was because he supported it.

There should be a spring economic update coming in April. Now would be a great time to put those words into action.

Forever and Always

Before this whole mess in Iran, the UK’s Climate Change Committee (CCC) released an incredible report that found the transition away from fossil fuels costs less than the economic implications of dealing with fossil fuel shocks. Inflation due to the war in Ukraine cost the British purse more than it would have to get off the fossil fuel roller coaster once and for all.

Incredibly, the CCC doesn’t forecast Brits’ lives will be upended under an energy transition scenario. They don’t expect everyone will squat in a cave eating foraged mushrooms or berries, and I’m pretty sure they factored in home heating and wifi.

We can live well without fossil fuels. In fact, we can insulate ourselves against the fallout from completely bonkers and devastating wars. A lot has been said about sovereignty: Canada can grow true energy security at home, and contribute more meaningfully to the Davos doctrine laid out by PM Carney, by having even less stake in the U.S. administration’s poor decisions.

Now’s as good a time as ever to make it happen.

Mitchell Beer traces his background in renewable energy and energy efficiency back to 1977, in climate change to 1997. Now he and the rest of the Energy Mix team scan 1,200 news headlines a week to pull together The Energy Mix and The Energy Mix Weekender.