United Nations Women (UNWOMEN)

ICELAND

Sustainable Consumption and Production: Its effect to Iceland’s Economic Growth

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Background Summary

For a long time, Iceland was a distant, otherworldly place that few travelled to.
But in the last decade, the ‘Land of Fire and Ice’ has stridden rather than seeped into
the global consciousness. It’s now a familiar presence on our screens, in our
magazines, on our holiday itineraries, and the secret is out: it’s beautiful.

However, Iceland’s appeal goes beyond its beauty. It’s also a recognized,
respected leader in cultural, social and environmental sustainability. Through hard
work and considerate choices, Iceland now ranks highly on many indexes for
sustainability and standards of living, and its capital, Reykjavík, has gained numerous
plaudits too.

At the beginning of the 20th century, Iceland was one of Europe's poorest
countries, its people relying on a precarious and polluting mix of imported coal and
local peat for electricity.

But over the next century, the island nation would pull off one of the great
energy makeovers in history, casting off fossil fuels and embracing geothermal power.
Today, nearly 100 percent of Iceland's electricity comes from renewable sources, a
transformation that has helped make its 366,000 people some of the wealthiest in
Europe (OECD, 2021).

Iceland is a Global Champion for the UN High-Level Dialogue on Energy (HLDE)

that took place on 24 September 2021. At the HLDE event, Iceland presented its
Energy Compact. The Energy Compact complements and is in line with the Paris
Agreement.

Currently, the country has been on the process of strengthening its

sustainability in consumption and production to achieve SDG 12 to be of more
progressive nation in terms in the consumption and production that would help the
country’s economic growth and development.

Previous Actions

Iceland has a very small, open economy, built on plentiful and cheap renewable
energy, the aluminum industry, tourism and fishing. Its people enjoy a high standard
of living and a good environment, with excellent water quality, low air pollution and
easy access to uncontaminated nature. The deep recession sparked by the 2008
financial crisis reduced some pressures on the environment, but also affected the
resources available for environmental programs and related infrastructure investment.
At the same time, it spurred interest in the transition towards a greener economy. The
natural environment is a key asset for Iceland’s recovery: it provides abundant hydro
and geothermal energy reserves, as well as the pristine wilderness and spectacular
landscapes that attract thousands of tourists every year.

Iceland adopted a comprehensive national strategy for sustainable development

in 2002. This has stimulated several environmental policy initiatives, including on
climate change, nature conservation and waste management. As a member of the
European Economic Area, Iceland has largely aligned its environmental policies and
legislation with those of the European Union.

Abundant and cheap renewable energy is one of Iceland’s key economic assets.
Power production capacity has expanded enormously to meet demand from new
energy-intensive industry, notably aluminum smelting. This has helped diversify the
economy, but also exerted pressures on the country’s unique landscape and fragile
ecosystems, and generated heated public debate. Iceland needs to fully address these
land-use conflicts if it is to succeed in developing its economy based on both power-
intensive industry and nature-based tourism. The recent energy master plan is a step
in the right direction. Reducing fossil fuel use in transport and fishing remains a
major challenge, given the relative lack of alternatives.

Economic growth will slow to 2.5% in 2023 and 2.3% in 2024. Private
consumption will weaken as wage growth moderates and dissaving comes to an end.
Business and housing investment are likely to decrease as financial conditions
continue to tighten, and public investment will also decline in 2023-24. Export growth
will remain strong thanks to robust growth of foreign tourism.

Possible Solutions

Iceland’s economy is growing rapidly, benefitting from rising exports of energy-

intensive products, such as aluminum, which have been expanding steeply over the
past few months. Foreign tourism is also recovering rapidly from its pandemic-induced
collapse. Household consumption remains strong on the back of continued wage
growth and dissaving, although real wages have started to decline in the wake of high
inflation. Business investment is stalling as confidence declines and financial
conditions tighten. The labor market remains tight, and labor shortages have become
more apparent. Around 2 500 Ukrainian refugees (0.7% of the population) have found
shelter in Iceland, with immediate access to the labor market.

Iceland is commonly thought of as a land ill-suited to agriculture. Despite the

richness of the volcanic soil on the island, only 1% of the land can be used for
traditional agriculture. And yet, Iceland produces over half of all the vegetable produce
consumed in the country each year, and it does so with 100% renewable energy. How
is this case? Icelandic farmers rely on greenhouse farming, which is heated and
powered by readily available geothermal energy. They grow 100% organic produce,
meaning there is no use of chemicals or pesticides during the growth process. The
farmers will even introduce insects into their greenhouses to manage pests naturally.
This creativity has shown that green agricultural practices can be applied anywhere in
the world.
 Sustainable production is the creation of manufactured products through
economically-sound processes that minimize negative environmental impacts while
conserving energy and natural resources. Sustainable manufacturing also enhances
employee, community and product safety, this would also help for the development
and economic growth of a country. Through this, controlled production for
sustainability will be achieved successfully.
Resources

Gunnarsdottir, T. K., (2017), Statement by H.E. Thorgerdur Katrin

Gunnarsdottir, Minister for Fisheries and Agriculture, High-level United
Nations Conference to Support the Implementation on Sustainable
Development Goal. https://www.eea.europa.eu/themes/sustainability-
transitions/sustainable-development-goals-and-the/country-profiles/
iceland-country-profile-sdgs-and

OECD Economic Outlook, Volume (2022)

file:///C:/Users/japzy/Downloads/Iceland-OECD-economic-outlook-
projection-note-november%202022.pdf

Guðmundur (2020) Iceland, a world leader in clean energy, supports Africa's

push for geothermal power.
https://www.unep.org/news-and-stories/story/iceland-world-leader-
clean-energy-supports-africas-push-geothermal-power