The OECD’s third Environmental Performance Review of Iceland notes that the country’s electricity output has more than doubled since 2000 to nearly five times the amount needed by the population of 320,000, mainly to fuel three foreign-owned aluminium smelters. The number of tourists drawn by Iceland’s rugged landscapes has also more than doubled in the same period to around 700,000 visitors a year. Both trends put pressure on the environment.

Renewable energy sources account for 85% of Iceland’s total energy supply, far more than in any other OECD country, and covering all of the country’s electricity needs and 95% of its heat. Any imported fossil fuels are used primarily in transport and fishing.

While hydro and geothermal power plants emit virtually no greenhouse gases, they can put pressure on local environments and they generate wastewater and pollutants that are detrimental to biodiversity and health. 

Tourism contributes around 6% of Iceland’s GDP, yet the arrival of growing numbers of tourists during the short summer season is putting a strain on fragile ecosystems and on infrastructure. 

Iceland has taken an important step towards addressing the trade-offs between power production, tourism and nature conservation in adopting a Master Plan for Hydro and Geothermal Energy Resources. This provides a clear guide on where energy resources can and cannot be developed.

The OECD Review recommends reinforcing the scientific and economic analysis in the next phase of the Master Plan and reassessing the prices Iceland sells electricity for to factor in the costs of caring for the environment. It suggests developing a sustainable tourism action plan and mechanisms to ensure that tourists contribute to financing nature preservation.

You can read the full report and a highlights document summarising the main points is available.