Iceland Prime Minister Geir Haarde, who since 2006 has presided over this small country that derives 80 percent of its energy needs from renewable sources, has been named the greenest political leader by NEWSWEEK. Iceland's happy status—which has insulated it from spiraling costs of coal, natural gas and oil—derives in large measure from accidents of geography. The country sits atop volcanoes that provide geothermal energy and possesses glaciers that produce waterfalls, which turn electricity-generating turbines. But while nature endowed Iceland with natural resources, it has taken decades of sustained leadership to wean Iceland off coal and other fossil fuels. Yet the focus on renewables has allowed Iceland to develop new industries and play an outsize role on the global stage. In March, Haarde sat down with NEWSWEEK's Daniel Gross to discuss Iceland's green energy past—and future.
GROSS: Iceland seems farthest along in developing a post-fossil-fuel economy. How have you managed to get here?
HAARDE: We are blessed with a lot of clean and renewable energy. For us, it's always been natural to use the natural warm water that comes out of the ground. We have done that for centuries to heat pools to bathe in, and for the past 70 years to heat our houses. These sources provide almost all our electricity. We don't import coal. We have no use for it.
It ' s an accident of geography and geology?
In part. I met the governor of Wyoming at a conference in Rome last November, and he said they have enough coal in the U.S. to last 200 years. From that perspective I can see how difficult it is to change behavior, because there is no imminent threat. It's a question of relative prices.
But governments can also affect relative prices through subsidies and tax policy. How important have such policies been in getting people to change their behavior?
We have put in some incentives for people to use nontraditional energy sources for their cars. We have been experimenting with hydrogen, and have a small research program with Daimler, Shell and others. But I don't think a small nation like Iceland can be in the forefront of the technology to transport cars with hydrogen.
Iceland is, however, trying to export some of its renewable-energy expertise.
Our companies that are active in the geothermal area are in the forefront of technology in that field and are now experimenting with what they call deep drilling, which involves going twice as far down and potentially producing 10 times more energy. It could be a breakthrough.
The decision to dam a river and build a new hydroelectric plant to service Alcoa ' s giant new smelter in east Iceland was controversial. What trade-offs did that entail?
The Alcoa project is a very big and important plant because it revitalized the economy on the east coast of Iceland. But there are different opinions in Iceland on how to use our resources. My view is that from a global perspective it is responsible to produce aluminum in Iceland from clean energy sources rather than produce it elsewhere from fossil fuels. The plant went through all the necessary environmental-impact assessments. It's a first-class plant. They are very conscious about the environment, about ensuring equal-opportunity employment for women, and are responsible citizens of the community.
How has renewable energy functioned more broadly as an economic-development tool?
We have had a policy of trying to diversify the economy away from fisheries for decades into areas like financial services and tourism. Thanks to renewable energy, power-intensive industries can now serve as a new pillar underneath our economy. There's been a decision to build a data center on the former U.S. base of Keflavik, which will tap into our renewable electricity. We'll see how that develops. Our power companies are receiving a lot of inquiries from companies, partly because the relative price of energy is favorable.
You say that the importance of geothermal energy goes far beyond the domestic economy. How so?
There's another side to geothermal that is increasingly important, and that's development cooperation. For more than 30 years, we have been home to the geothermal department of the United Nations University. They have been training scientists from developing countries who have now become important personalities in the field throughout the home countries. We can contribute to the economic development of foreign countries by teaching them to use this resource that is more commonly available than people think, including in the United States.
What advice would you offer to political leaders and executives who blanch at the high cost of the investments required?
When my mother was growing up, there were people around who remembered the coal dust clouding the sky over Reykjavik in the 1930s and 1940s. Now, with a natural hot-water heating system, it's a completely clean city. This has taken decades with a lot of investment.