The carbon premium, the financing-cost spread between carbon-intensive and low-carbon firms, is confounded by oil shocks, especially during commodity-stress periods. Event studies and time-series evidence show that oil shocks drive upstream extractive firms’ financing costs in equity and bonds via growth options and risk exposures, with limited pass-through to other brown firms; oil beta captures only part of this effect. Re-examining the Paris Agreement, we separate upstream and downstream brown firms and characterize oil and climate news. The Paris effect aligns with oil shocks, not climate-policy news or anticipation; with oil exposure controlled, we find no carbon-transition-risk repricing around Paris.