Thursday 23 April 2026 5:05 am  |  Updated:  Wednesday 22 April 2026 11:28 am

How to tax in an energy crisis

By: Tim Sarson

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Whether the government wants to maximise North Sea oil extraction or home grown renewables, tax policy can help, says Tim Sarson

Recent global events seem to have a knack of happening in places that send energy prices through the roof. Last time it was the loss of piped gas from Russia into Europe. Now it’s the long-feared choking off of the famous Straits of Hormuz. 

In both cases the shock caused by an international conflict has led to inflationary pressure which, as sure as night follows day, soon becomes a fiscal headache for the government. That fiscal headache gets people talking about our energy policy again. And before long the talk turns to tax.

There are two reflexive political positions on how to deal with a hydrocarbons supply shock. One, let’s call it the “drill baby drill” response, is to blame our vulnerability on the collapse in North Sea oil and gas extraction and too much policy focus on net-zero. The other says au contraire: this shows how important it is to wean ourselves off volatile fossil fuels on to home grown renewables.

It seems to me that these options need not be mutually exclusive, but my aim today isn’t to opine on the right approach to combating climate change and relieving........

© City A.M.