A key aim of climate policy is to progressively substitute renewables and energy efficiency for fossil fuel use. The associated rapid depreciation and replacement of fossil fuel-related physical and natural capital will entail a profound reorganisation of industry value chains, international trade, and geopolitics. Here, we present evidence confirming that the transformation of energy systems is well under way, and we explore the economic and strategic implications of the emerging energy geography. We show specifically that, given the economic implications of the ongoing energy transformation, the framing of climate policy as economically detrimental to those pursuing it is a poor description of strategic incentives. Instead, a new climate policy incentives configuration emerges where fossil fuel importers are better off decarbonising, competitive fossil fuel exporters are better off flooding markets, and uncompetitive fossil fuel producers – rather than benefitting from ‘free-riding’ – suffer from their exposure to stranded assets and lack of investment in decarbonisation technologies.