UK cities react against the government attack on their freedom to divest


Publication date

February 19, 2016

Several UK cities, including Energy Cities’ member Milton Keynes, have spoken up against controversial plans from the national government to put restrictions on their freedom to divest from fossil fuels. Once again local leadership is being hampered by obstacles from the national level. A situation which reminds us of the not-so-distant case of the city of Vaxjo’s ambitious sustainable energy legislation being challenged by the Swedish competition authority.

An attack on democracy

UK councils were recently warned by the national government that they will face “’severe penalties’ if they divest from fossil fuel holdings or boycott oil, coal or gas firms in procurement tenders” the Guardian revealed. This decision is difficult to understand a few months only after the British government committed to reduce greenhouse gas emissions to net zero later this century during the COP21 in Paris. Even more incomprehensible is the ’protection of UK taxpayers’ argument used to justify the measure as fossil fuel investments have recently been labelled a “stranded asset” risk by the governor of the Bank of England.

The council leader of Milton Keynes, member of Energy Cities, called the announcement an “undemocratic attack on the renewable energy sector”. “If local councillors wish to choose other investments, such as green energy that are in the longer term interest of society, then they should be free to do so”, he added. 
Several British cities including Energy Cities’ member Bristol have already joined the divest movement. Local governments need more room to act and drive the energy transition rather than undemocratic restrictions aimed at preserving an unsustainable model.

Divest for dummies

The fossil fuel divestment movement started a few years ago and is growing stronger and stronger thanks to the momentum created by the COP21. Numerous investment funds, universities and city councils have already committed to withdraw their money from fossil fuel related investments. Two main arguments back these decisions. First, divestment acts as a disincentive for fossil fuel companies to invest in new projects. This is essential to meet the 2°C climate target the international community agreed upon. Second, there is a financial argument based on the recent climate agreements. Fossil fuel related investment are risky assets as they will become worthless when the climate targets are met.