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After Economic Collapse, Here's How Iceland Rebuilt a Powerful Green Economy

Iceland Sustainability Student Work
by Shaikha Al Khayyal Oct 8, 2014

Iceland holds the honorable title of the world’s leading clean-energy economy and its president, Ólafur Ragnar Grímsson, is a relentless advocate of sustainable development. Earlier this year, I attended a seminar in which he shared lessons his country has learned about building and sustaining a green economy.

Here are a few takeaways that can help your country ignite a green economy.

1. Switching to alternative energy isn’t as costly as you think.

“The solution lies in a complete energy transformation from fossil fuel dependence to alternative energy,” Grímsson said.

Until the 1970s, Iceland was classified a developing country by the United Nations Development Programme. For centuries it was among the poorest in Europe, a nation of subsistence farmers and fishermen with 85% of its electricity coming from imported coal. Today, almost 100% of Iceland’s electricity and heat is generated from domestic renewable sources, mainly geothermal. Shifting from sending money overseas for coal to paying local electricity providers has saved Iceland the net profit of half of its GDP in 10 years.

2. Sustainable development is a profitable business.

Grímsson encourages a global discussion that positions the economy in the center of the conversation. “I bet things will be different when the world realizes what a profitable enterprise this energy shift is,” he said.

Engaging countries in sustainable development, while at the same time building profitable enterprises, starts with empowering people and communities to create sustainable businesses. “It is time to realize that this is a positive, economic, profitable change,” Grímsson added.

3. You hold the power.

Iceland’s politicians never mandated the switch to renewables. Instead, the change was made house by house, street by street, city by city, and district by district.

This bottom-up approach provided multiple business opportunities in the clean-energy sector — initiatives were led by local communities, small villages, individual entrepreneurs, and techonocrats. Over time, it created a dynamic of sustainable-business innovation and resulted in a complete national transformation. As a result, people now enjoy their electricity and heating services at a much cheaper rate.

4. This is a rare chance to do something good and make a profit.

“Building a green economy is paradoxically an area to be morally correct while making serious money. You can’t say the same for most of our current economic affairs,” said Grímsson.

5. Cultivating a green economy is an investment in the future.

Five years ago, the Icelandic banks collapsed. With its new economic model, the country has taught a valuable lesson to other European nations on how to survive a major financial hit. Thanks to the lasting investment in clean energy that started decades ago, today Iceland has 3% annual economic growth, and less than 5% unemployment. The cost of power and heat has significantly decreased, increasing the economic standards for families and decreasing production costs for industry.

6. If you build it, they will come.

The energy shift turned Iceland into a magnet for large foreign investment. Some of the biggest aluminum smelters, data-storage centers, and IT brands in the world are based there due to the long-term availability of clean energy at fixed prices. The strong marketing positioning it gives them doesn’t hurt either.

7. Eat what you grow.

To enhance the country’s food security, the local network of farming families capitalized on local greenhouse cultivation methods. This nation knows exactly where its food comes from and how it’s grown, organically behind glass walls or in fish farms.

Iceland is now the home of the biggest (glass-enclosed) banana plantation in Europe, and it’s seeking the title of the largest exporter of organic tomatoes in Europe.

8. Food security is everyone’s concern.

Enough food is probably produced in the world for everybody — the problem is in the storage technologies that most developing countries can’t afford. Thirty years ago, Icelandic fishermen came up with an idea to increase the storage time of fish heads and spines from a few days to up to two years. These fishy parts used to be thrown back into the ocean, but now Iceland exports them to Nigeria as a foodstuff, after it undergoes an elementary drying process utilizing geothermal heat. This operation required zero infrastructure cost and has proven commercially viable for both countries.

9. Ecotourism is a budding cash cow.

A country with such epic natural beauty as Iceland will inevitably attract ecotourism. But Iceland takes it a step further by linking some of its most-popular attractions with the green economy.

Take the Blue Lagoon for example: the most-popular attraction in Iceland sees more than 600,000 annual visitors in a country with an entire population of only about 323,000. In essence, the Blue Lagoon is nothing but an overflow of hot water from the Svartsengi geothermal plant. It didn’t exist 30 years ago. It was created by clever Icelandic engineers to attract tourists who pay 40 euros to bathe in the magical, steaming blue water.

Another popular tourist attraction in Reykjavík is the Perlan revolving restaurant complex, which sits on top of geothermal tanks and provides a fantastic panoramic view of the city.

10. Education is key.

Iceland isn’t just an example of green living; it’s also doing its part to heal the globe by trading sustainability education through its UN Geothermal Training Programme. It has trained more than 400 professionals from developing countries with geothermal potential since 1979, which has in turn led to the establishment of profitable diplomatic investments.

Moreover, Icelandic researchers, engineers, and scientists are involved in fruitful sustainable development projects in more than 40 countries around the world. Obviously, this small nation has big things to say on sustainable energy.

11. It’s not all about you — give others a hand.

On a diplomatic level, Iceland has developed partnerships with other geothermal-rich countries that are eager to copy its example, like Russia, the Philippines, Indonesia, and numerous Western and Eastern Europe nations.

In China, Iceland is helping Sinopec replace coal power stations with local geothermal heating. Also, Reykjavik Geothermal broke ground in July on the largest geothermal power plant in Africa, in Ethiopia’s Corbetti Caldera region, a flagship project that’s critically important for the continent.

12. Think outside the box.

The possibility of exporting electricity from Iceland to the UK via an ocean cable has recently emerged. Looking to upgrade its national grid, the UK is seeking new ways to develop electricity using renewable means and a link from Iceland might be the answer. Unless the UK (like Germany, the Netherlands, and other European nations) gains access to it, its entire energy system could degrade over the next few decades.

Hydro-rich European countries — notably in Scandinavia — are working on creating a network of underwater ocean cables to help neighboring countries avoid future electricity shortages. Norway extended such a cable to the Netherlands, and has already recovered its investment.

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