Sustainability lessons from Iceland

Countries are being urged to accelerate decarbonisation plans in order to keep global climate goals on track. Iceland is doing just that, but what can other countries learn from this small island nation?


When the world’s leading climate scientists released the final instalment of their latest assessment report in March 2023, the thousands of pages amounted to a warning: world leaders must act more quickly on climate change. Upon the Intergovernmental Panel on Climate Change (IPCC)’s latest publication, United Nations secretary general António Guterres told leaders that it was now or never, and he called on nations to invest in renewable energy and low-carbon technology to reduce emissions in order to hit net zero targets “as close as possible to 2040” – a deadline that is a decade before the 2050 goal most countries are aiming for.

Economies have been slow to decarbonise, but the target of limiting warming to 1.5°C is still achievable, the IPCC report said. “There is sufficient global capital to rapidly reduce greenhouse gas emissions if existing barriers are reduced,” it said, calling on governments, investors, central banks and financial regulators to play their part. One country is hoping to be a model of how to eliminate barriers to carbon neutrality and freedom from fossil fuels: Iceland. But what does decarbonisation look like in Iceland, and can other nations replicate its methods for reaching this milestone?

A distinct advantage
Iceland has a goal to be carbon neutral by 2040, and leaders have put forward an ambitious climate action plan to achieve this. But the country, famous for its volcanoes and geothermal spas, undeniably has an advantage. Iceland has already phased out fossil fuels in both electricity production and house heating. “Iceland has been harnessing renewable energy for over a century,” explained Nótt Thorberg, director of the trade group Green by Iceland, which is part of Business Iceland.

“At the very beginning, it started small – just some experimenting amongst a few entrepreneurs.” New businesses found innovation in the application of geothermal for direct house heating and developing hydro power from springs in the early 1900s, and it grew from there. “Today, over 85 percent of Iceland’s primary energy stems from renewables, and 100 percent of electricity and house heating is renewable,” Thorberg said. But there is still work to be done. Green by Iceland has cited several areas, including: transitioning to a carbon-free transportation system, implementing more effective waste management practices, scaling up sustainable agricultural practices and boosting local carbon removal efforts.

Leading by example
Over the past century, Iceland has built its expertise in geothermal energy, which has advantages and disadvantages. Geothermal technology involves extracting heat from the ground to be used directly for heating or converted into electricity. It is low cost and able to operate year-round at stable levels, unlike wind and solar power. However, to be used to its full advantage to generate electricity, particular conditions are needed that are limited to tectonically active regions. Iceland’s 32 active volcanic systems make it one of the most active volcanic regions on the planet, with eruptions occurring every four years on average. Currently, just 20 countries generate geothermal energy, and with its famous hot springs and geysers, Iceland is the poster child for the technology.

Iceland’s innovative answers to decarbonisation should give other countries the inspiration to search for solutions

Geothermal accounts for more than 60 percent of Iceland’s primary energy, according to Thorberg, but she insisted that its adoption could be wider. “Interestingly, many countries have the opportunity to harness geothermal,” she said. “If you look at a heat map of the world, many parts will light up. This goes for large areas within the US and Europe, for instance.”

For countries looking to start generating energy with geothermal plants, investment in research and development (R&D) is a given, but Thorberg said Iceland has seen a significant return on investment, with savings of three percent of annual GDP as a result of geothermal applications. As innovators in the sector, they are now taking their expertise further afield. “Iceland has accumulated considerable experience and knowledge when it comes to geothermal and the cascading uses, and many of the solutions that have come out of our journey can be applied in other parts of the world.”

Reykjavik Geothermal, which was founded in 2008, has a focus on exporting its expertise to emerging markets that have ideal resources for geothermal energy, and it is currently constructing two projects in Ethiopia. In the African Rift Valley, Gunnar Orn Gunnarsson, founder and chief operating officer of Reykjavik Geothermal, said the volcanic geology is familiar, and experts in Iceland are keen to help and educate other countries. “It’s an environment we understand,” he said. Arctic Green Energy was similarly created to export Iceland’s leadership in geothermal and other renewables to the emerging markets of Asia. The business teamed up with China’s Sinopec in 2006 to create Sinopec Green Energy, which has become the world’s largest geothermal district heating company.

Continued innovation
Iceland fosters a culture of resilience and innovation inspired by necessity. “The fact that we are a small nation is a strength, it brings closeness, and we share a common vision,” said Thorberg. “Especially during times of crises, we have thus worked together to make the most of what we have within Iceland. So, there is a degree of resilience, courage and forward thinking ingrained in our shared values as a nation, which has brought us where we are today.”

This is evident in its growing start-up ecosystem. From ORF Genetics, which is hoping to be a game-changer in the lab-grown meat sector, to Vaxa, which converts clean energy into nutrient-rich microalgae. One of the country’s most exciting innovations comes from a business partnership to pull carbon dioxide (CO2) from the air and store it back in the ground. Carbfix is accelerating a natural process that usually occurs over geological timescales, whereby CO2 is turned into rock. Using their method, the process can be completed in just two years. The business has plans to scale up significantly to decrease emissions from heavy industry worldwide. “We have very high interest from abroad to investigate various ways of collaboration, whether it be to analyse rock formations, use our geological expertise to estimate whether an area could potentially be a good place to apply our technology, whether we could receive emissions captured by other companies around the world – all of these discussions are going on,” said Ólafur Guðnason, head of communications at Carbfix. “We foresee within the next few years to have a definite project underway somewhere abroad.”

Working together
Collaboration is critical for success at companies like Carbfix, as it only forms one part of the decarbonisation solution – it needs a partner company to capture the CO2 before it stores it in the ground. “Because our solution is regarded as tried and tested, we’re fortunate to have a lot of chances to collaborate with direct air capture companies,” Guðnason said.

In Iceland, he said, companies benefit from a small population and a close relationship between the government and industry. “The cluster mentality of collaborative innovation is quite strong here as a culture in Iceland, and we as Carbfix have definitely benefited immensely from collaborating with academia and other companies. Collaboration is a core element for us to move forwards,” Guðnason said.

Because of the nature of Iceland’s geothermal energy plants, businesses have naturally clustered around power facilities to share resources. However, that attitude extends beyond the energy sector. Iceland Ocean Cluster is using the same collaborative spirit to connect entrepreneurs, businesses and knowledge in the marine industries to create a circular economy centred around another of Iceland’s vast resources: fish. “There is no waste in the seafood industry,” says Thor Sigfusson, founder of the Iceland Ocean Cluster. “There is economic value in this.” As well as creating seafood, fish byproducts can be used in beauty products, in clothing and fashion and even in the medical industry: Kerecis, an Iceland-based business, uses cod skins to heal wounds.

Iceland’s unique location and geography have presented opportunities for innovative businesses, and certainly some of these projects could be replicated elsewhere. But perhaps the biggest takeaway is the way the Icelandic businesses, government and people have collaborated over the country’s climate goals. The latest IPCC report stressed the importance of sharing knowledge and expertise. “If technology, know-how and suitable policy measures are shared, and adequate finance is made available now, every community can reduce or avoid carbon-intensive consumption,” it said.

“Iceland has an abundance of natural resources, and we went from being one of the poorest nations in Europe to one of the most prosperous ones,” says Thorberg. “Our geographical location meant we needed to push new boundaries to develop as a country.” What’s important to consider, she continued, is that Iceland’s renewable transition was a political decision, with significant upfront investment and R&D. Rather than a copy-and-paste strategy, Iceland’s innovative answers to decarbonisation should give other countries the inspiration to search for solutions based on their own resources and opportunities. “I think other countries can learn from our path, in that sense,” Thorberg said. “There is a degree of courage you need in the beginning. To succeed in your strategy, you will need to do things differently – just as Iceland did.”