Iceland looks to green, innovative income sources

The Island state, independent of the European Union, is planning sustainable growth after its 2008 collapse.

REYKJAVIK // Greek unions this week ramped up a revolt against draconian budget cuts as their government faced new pressure to reign in a deficit that has sparked the most serious crisis faced by Europe's common currency. But while the turmoil in the Mediterranean state continues, another debt-stricken European nation that last year experienced an even worse economic collapse is exploring innovative ways to lift itself out of the doldrums.

Iceland, which became Europe's most severe casualty of the 2008 financial crisis when all three of its major banks collapsed and its right-of-centre government was thrown out, is turning to green technology and investigative journalism - among other measures - to try and boost its economy. Icelandic MPs submitted plans to the parliament this week for the Icelandic Modern Media Initiative, which aims to counteract the growing practice of libel tourism in countries like Britain, with its plaintiff-friendly libel laws.

The country is overhauling its freedom of speech laws in a bid to lure global media organisations seeking a base for investigative journalism. "I'm excited about what is happening in Iceland, which has started to see the world in a new way after its mini-revolution a year ago," said Julian Assange, the co-founder of the online whistle-blowing website Wikileaks, who has been advising on the project in recent weeks.

Previously famous for its fishing industry, geysers and being named by the UN in 2007 as the best country in the world to live in, the seeds of future economic disaster were sown over the course of more than a decade of light touch regulation that saw banks and individuals rack up huge levels of debt. The 2008 global crash was the catalyst for the collapse, which saw thousands of Icelanders take to the streets during the saucepan revolution - so-called because of the kitchenware that was used to make noise outside Iceland's parliament - leading to the ouster of the hugely unpopular government.

Over the past 12 months, scores of businesses have gone bust, unemployment has gone from being virtually non-existent to over eight per cent and the misery from a wave of home repossessions has been allayed only by a government moratorium. According to entrepreneurs like Guðjón Már Guðjónsson, however, the very fact that Iceland's economy is starting almost from scratch makes it the perfect laboratory for green ideas.

"We are rebooting the complete financial and political system of an entire western European country, so we have some unique opportunities," said Mr Guðjónsson, the founder of Ministry of Ideas, a think tank dedicated to finding innovative ways to lift the country out of its predicament. Mr Guðjónsson points to the example of the electric car: prototyping such a product is perfectly suited to Iceland, he said, because of the island's sophisticated electricity grid and the fact that the small population of 316,000 allows for the deployment and testing of new products at a much faster rate than in larger markets.

Ultimately, Iceland's new Left-Green coalition government wants to transform the country into an environmental role model. Central to that vision are Iceland's rich renewable energy resources - principally geothermal energy from deep inside the ground, which along with hydropower generates more than 80 per cent of Iceland's primary energy and 99 per cent of its electricity. Already, the collapse of Iceland's krona has also allowed its geothermal engineers to be more competitive when it comes to exporting their expertise.

There has also been increased talk about exporting geothermal energy to Europe, possibly via a pipeline, which has already been floated as an idea by government advisers. For now however, the government's main focus is on Iceland becoming a world leader in attracting new green industries, developing recycling and eliminating the use of fossil fuel in such sectors as transport. Instead of importing oil to power its vehicles and fishing vessels for example, experts say they could be powered with electricity from hydroelectric and geothermal plants. Hydrogen-powered cars already zoom around the streets of Reykjavik.

The new, more sustainable, direction is long overdue according to experts like Kristin Vala Ragnarsdottir, dean of the School of Engineering and Natural Sciences at the University of Iceland, who has been advising government ministers on sustainability. "The financial and development outlook of the last government was all based on harnessing energy and building heavy industry like aluminium plants, but if we built both of the aluminium factories currently planned we will have used every drop of energy in the country," she said.

"In addition, a lot of people are still predicting a world economic collapse, and we have already reached peak oil, or are approaching it, so we have to change." Among the general population, views on their country's economic plans are mixed, but there is agreement that a focus on job creation is needed "I think it's very hard to be graduating right now so there is the possibility of major migration if a lot of people lose their jobs," said Herdís Ólöf Kjartansdóttir, a business studies student whose cousin moved with her family to Norway to find work.

Others accept that the economic collapse has been severe, but suggest that its impact has perhaps been exaggerated in some ways. "I think that life is going on as usual but there have been changes underneath the surface of society," said Gloey Finnsdottir, 39, a civil servant who lives in Reykjavik with her partner and their nine-month-old son. "The cost of living has gone up enormously, while property prices have fallen."

Away from visions of a sustainable future however, attention is focused on more immediate ways of securing stability - joining the European Union and availing of the type of support which Greece is now counting on, and which Iceland was without when it faced the 2008 crisis virtually alone. The European Commission is expected to recommend next week that accession talks begin with Iceland, launching a process the latter hopes will lead to EU membership by 2012.

For now, its aspirations are partially linked to a dispute with Britain and the Netherlands over US$5 billion (Dh18.4bn) in debts which the two larger countries say Iceland owes them for repaying savers who lost money in Icelandic online accounts during the 2008 financial crisis. Iceland said talks held this week in London over the debt were positive. * The National