Iceland Can Complete the Energy Transition


We must react

Hörður Arnarson, CEO, Landsvirkjun

A clear consensus has been reached among countries to limit the average temperature increase to 1.5°C. This was manifested at the recently ended Glasgow Climate Conference, COP26, and by the Glasgow Climate Pact, signed by the participant countries. To reach this goal, greenhouse gas emissions must be halved before 2030. It is already clear that we must react faster, take the necessary action, and make systemic changes, only to gain control over the unremitting global warming. Every day that passes makes this task harder.

Not everyone agrees on the success of the COP26. However, it is evident that it led humankind towards the changes that must be brought forth. There was a positive outcome on many issues, but it cannot be denied that the Glasgow Climate Pact and current pledges for financial support will not suffice to keep global warming at 1.5°C. Thus, it is vital that an agreement was reached to review the countries´ goals next year at the COP27 in Egypt. As the awareness for climate change is rapidly increasing, there is reason to believe that a considerable change will happen over this one year.

Industries Take Leadership

It was abundantly clear at COP26, that there had been a paradigm shift since the UN Climate Change Conference in Paris 2015, as leaders of industries seem to have realised the severity of the problem and have in fact taken leadership, instead of leaving the matter solely in the hands of politicians. Industries bring forward ambitious actions and changes, e.g., transformation of production processes, the use of renewable energy resources, and various technological revolutions. In this sphere people realise that the fight against the climate change gives us new opportunities, i.e., in the systemic changes that must be introduced, and the innovation needed to realise these changes. This determined stance gives hope that we now have the sorely needed driving force against climate change. Nevertheless, governments must coordinate measures and create the right conditions and incentives for industries and set rules and regulations .

Climate Issues Are Energy Affairs

Climate issues are, without a doubt, energy affairs. Climate issues also concern equality, just as energy affairs. Equal accessibility to renewable green energy for everyone is the basis for collectively gaining control on the climate change. In 2050 all energy use must be from renewable energy generation/renewable resources.

Even though the wording of the Glasgow Climate Pact, regarding decreased use of fossil fuels, was somewhat weaker than expected, a clear statement was obtained acknowledging that the use of fossil fuels is the main cause for climate change and their use must and will be stopped. This entails that the development of renewable energy resources and the energy transition to renewable electricity and electric fuel must be enormously fast in the coming years. Technological advances in recent years and governments‘ support for the development of renewable energy resources has certainly made a difference. The technology for generating electricity from renewable energy resources is competitive with the production of electricity by fossil fuels, and even more economical. Therefore, it is odd that hefty subsidies are still granted to fossil fuels, which skews the competitive position of renewable energy resources. This must be corrected.

Carbon Markets

An important milestone was met in Glasgow when new regulations were set for carbon sharing and carbon markets. These markets provide an opportunity for companies and states to finance measures that lead to the largest reduction in emissions, irrespective of borders. The appeal from industries for clear regulations, and for a price be put on climate impact and applied to carbon units, has been loud in the preamble of the COP26, and to a degree the carbon markets are the answer. However, it remains to be seen how these new regulations will be adopted. Meanwhile, companies, including Landsvirkjun, have increasingly been introducing an internal carbon price to make informed decisions in their operations, regarding climate change.

Realistic Goals

Iceland has set itself ambitious goals for carbon neutrality by 2040 and to be fossil free by 2050. This appears to be a realistic goal, and the willingness by companies, communities, and authorities to implement measures is evident. Certainly, reduced emissions in Iceland are important for the environment, but due to its size it can be inferred that Iceland‘s contribution to the fight against climate change will primarily be from leading by example.

As it happens, Iceland is in pole position to be the first country in world to be fossil fuel free and has a unique opportunity to fully complete the energy transition. Iceland holds the world record for the highest proportion of primary energy consumption being sourced from renewable energy (approx. 85%), and all electricity use, and district heating is sourced from renewable energy. On top of this firm foundation, Iceland is in the position that no oil-, gas- or coal industries are fighting against the energy transition, unlike most countries.

Iceland is ideally suited for conducting a pilot project for an energy transition for a whole community. That process includes various challenges, but through it we will gain important experience and knowledge. Complete energy transition means stop using petrol and diesel for vehicles, ships, and airplanes. This is a gigantic and compelling project. We better roll up our sleeves and get started if we want to lead the way.

The government must provide guidelines for the energy transition, but execution will be in the hands of companies and individuals, in cooperation with the government. Electrification of the vehicle fleet is well on its way, and there are many examples of cooperation between the government and companies. Electrification of every type of vehicle, i.e., commercial heavy-duty trucks, ships and airplanes is not ideal, first more green energy resources must be provided. The production of green fuel, e.g., hydrogen or other type of electric fuel, from ammonia, methanol, or methane, is the premise for completing the energy transition in Iceland.

Powerful, renewable electricity production in Iceland provides us with an opportunity to conduct a pilot test without delay. This can deliver substantial advancement on the road to carbon neutrality and ending the use of fossil fuels. It is now time to select the projects and execute them so that we can attain the set goals on climate issues that the world is calling for.