Iceland, Environmentalists Clash

Barren, wind-lashed and isolated, Iceland seems an unlikely economic success story. But this volcanic island nudging the Arctic Circle has grown affluent by tapping the riches of the sea and the energy roiling beneath the earth.

Clean, abundant geothermal energy and an efficient, well-ordered fishing industry have given Iceland's 280,000 residents one of the world's highest standards of living. Now, however, economists and environmentalists are facing off over the country's economic future.

With fish stocks declining, the government wants to reduce Iceland's dependence on the ocean — in part by sacrificing a little of its wilderness.

The government and American aluminum giant Alcoa Inc. plan to build a huge power plant and smelter in the country's majestic Eastern Highlands. Environmental groups say it will ruin one of Europe's last wildernesses, an area of icy glacial rivers and craggy gorges populated by reindeer, whooper swans and pink-footed geese.

"These projects are justified in terms of economic gain. But when we looked into the economic gain, we found there was none at all," said Arni Finnsson, director of the Icelandic Nature Conservation Association.

The project involves damming two rivers to create a 22-square-mile reservoir above Vatnajokull, Europe's biggest glacier. The power will be used to drive a smelter on the coast.

The plan has attracted high-profile opposition. Icelandic pop diva Bjork — the country's most famous daughter — said it would "sacrifice nature." Her mother waged a three-week hunger strike this fall to highlight opposition to the plan.

In August 2001, Iceland's State Planning Agency vetoed the project because of its environmental impact, but the decision was overruled by Environment Minister Sif Fridleifsdottir.

The government says the economic benefits — including up to 1,000 permanent jobs in a depressed region — outweigh the limited environmental harm.

"In making such decisions, it is not enough to focus only on environmental issues," Industry Minister Valgerdur Sverrisdottir said in October 2001. "We also need to take economic and social factors into account."

Iceland's affluence and economic stability have been hard won. Iceland suffered double-digit inflation in the 1970s — driven in part by oil shortages — that peaked at 85 percent in 1983. Declining fish prices dragged Iceland into recession in the late '80s and early '90s. But in the last decade the government's economic policies have delivered low inflation, low unemployment and a per-capita gross domestic product of about $25,000.

Most agree that Iceland must be weaned off its reliance on fishing. Fish generates 70 percent of the country's GDP but employs only one in nine workers, and the future of Atlantic whitefish stocks is uncertain after decades of international overfishing.

The coalition government led by Prime Minister David Oddsson has campaigned hard to attract foreign investment, slashing corporate income tax from 30 percent to 18 percent. The result has been significant investment in biotechnology, information technology — and aluminum, the country's second-largest export earner.

The East Highlands project could produce 295,000 tons of aluminum a year, eventually doubling Iceland's production. The reported $3 billion cost of the plan is the equivalent of a third of the country's GDP.

The government argues that harnessing Iceland's hydro power provides a clean, renewable — and cheap — source of energy that will attract industrial investors like Alcoa. The government has long-standing plans for another hydroelectric plant at Thjorsarver, a wetland area in south Iceland, and a Russian-Icelandic consortium wants to build a geothermal powered bauxite refinery and smelter near Akureyri in the north.

Opponents fear a string of massive power projects despoiling Iceland's rugged interior. And some economists say the government is putting too much faith in aluminum, especially with prices for the metal in long-term decline.

Thorsteinn Siglaugsson, a Reykjavik-based economist, said the Alcoa plan was based on "good will and high expectations for aluminum prices."

He claims the project is too dependent on a single customer, is unlikely to make a profit and will have little impact on the country's coffers.

Landsvirkjun, the publicly owned National Power Company, says the project went through a rigorous environmental assessment and will have only a minimal impact on a small part of the wilderness area. The project was approved by a large majority of lawmakers in the Althingi, Iceland's parliament, and opinion polls suggest a majority of Icelanders approve it.

"There are some people who want society to evolve in a different direction," said Landsvirkjun spokesman Thorsteinn Hilmarsson. "That discussion has been going on for a long time, and still goes on. But the general public more or less agrees with what is going on."

He says the project still could be scuppered by the bottom line. One investor, Norwegian multinational Norsk Hydro, pulled out last spring amid reports it was having trouble raising money.

Alcoa and the government finalized a power contract on Dec. 13, setting off a new round of legal scrutiny and economic evaluation before final papers are signed.

"If anything is changing on this project, it's going to be because of economics," Hilmarsson said. "We will make the decision based on the profitability of the project."

"The Highlands as a whole have an economic value," said Finnsson. "These areas are more and more rare in Europe. Tourists will see things here they won't see anywhere else. People don't come here to see hydropower structures. They come to see our unique landscape."

Environmentalists are confident they can stop the plan. They claim a national park above the Vatnajokull glacier would create almost as many jobs as the power project and would attract adventurous tourists who come to Iceland to experience a fiercely beautiful landscape studded with glaciers, waterfalls, volcanoes and thermal hot springs.

"The Highlands as a whole have an economic value," said Finnsson. "These areas are more and more rare in Europe. Tourists will see things here they won't see anywhere else. People don't come here to see hydropower structures. They come to see our unique landscape."

The trick is getting enough tourists to come. I agree with the Enviromentalists that the area has potential for tourism. The area they are speaking about is incredibly beautiful and if you want to go somewhere to get away from it all- Iceland is the place. It's one of the most beautiful places I've ever visited.

But it has a very brief "general tourism" season. For example, Landmanalaugar is a popular tourist hiking destination. But the buses to it only start in late June (depending on the melt) and end again in a couple of months. This means if you go there in May, you will be forced to hike up from Porsmork and back- 5 to 7 days round trip- where if you could just take the bus to Landmanalaugar and then walk down to Porsmork it would take 2- 4 days (depending if you decide to be leisurely about it) and then have time to explore other parts of Iceland. You can contrast this with a successful tourist park- South Africa's Kruger Park- which is easily visited 12 months out of the year.

It's a trade off. The area is beautiful, but if the beauty of the landscape isn't attracting enough hikers, they have to think about the bottom line. Already, one of Reykjavik's big tourist draws- the Blue Lagoon- is energy industry related. It is a hot outdoor bath with blue water (from the silica mud). It is very surreal to go there when there is snow everywhere. The hot water is the runoff from the geo-thermal power plant nearby. It sounds like it wouldn't be a nice thing, but trust me, it is really nice. That's a good example of industry actually attracting tourists.

"
It's a trade off. The area is beautiful, but if the beauty of the landscape isn't attracting enough hikers, they have to think about the bottom line. Already, one of Reykjavik's big tourist draws- the Blue Lagoon- is energy industry related. It is a hot outdoor bath with blue water (from the silica mud). It is very surreal to go there when there is snow everywhere. The hot water is the runoff from the geo-thermal power plant nearby. It sounds like it wouldn't be a nice thing, but trust me, it is really nice. That's a good example of industry actually attracting tourists.

"

Blue Lagoon's proximity to KEF/reykjavik makes it an easy day excursion...I am not sure how many people are going to go stay in Egilsstaðir, Akurnes, etc..to see this or any other feature...Even Myvatn only has maybe 100 rooms total actually at the lake area (I am guessing, there are only a few hotels), and total hotel capacity in akureyri cannot be much (I count 5 hotels??)...

I go every january, since there are basicly no tourists and a good car with correct tires can navigate all the main roads (I almost always have been all alone at þingvellir, gullfoss, with the north being even more abandoned), but it looks like this year could be warm. Where's the Ice? I am going to try to make it to the east coast this time (the farthest counter-clockwise I have been on the ring road is myvatn, the farthest clockwise is vic.

http://www.vedur.is/english/vedurisland_ensk.html?

But when we looked into the economic gain, we found there was none at all," said Arni Finnsson, director of the Icelandic Nature Conservation Association.

Wait.
I'm confused.

I missed the part that said the Icelandic Nature Conservation Association was going to finance the proposal.

How can a bunch of leeches afford it?

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