Green Energy Transitions: The Curious Cases of Iceland and China

By Dan Polkow, Law & Policy Clerk

Iceland's Krafla geothermal power plant.
Image by Andreas64 from Pixabay

China and Iceland. These two countries are vastly different in size, population, and cultural makeup but they do have one thing in common: these countries have shown the possibilities of green energy technology markets and solutions. Iceland and China transitioned to renewable energy technologies out of necessity. The 1973 oil crisis forced Iceland to find alternative sources of energy and be creative in utilizing their unique landscape, and as of 2020, 100% of the electricity used in the country is renewable.  In contrast, China was forced into the green energy market because of continuing political unrest created by the smog pollution that has plagued the country. China now the leads the world in developing renewable energy technologies, accounting for 29% of all global patents, and shows how green energy companies can compete step for step with their fossil fuel competitors. Though the energy transitions in Iceland and China were each motivated by unique factors and circumstances, both countries help exemplify the benefits of investing in and transitioning to robust green energy economies.  

Iceland’s electricity grid carries 100% renewable energy that is generated exclusively from hydro and geothermal power sources. In addition to generating electricity, Iceland also uses geothermal energy for space heating. Geothermal heating in Iceland decreases dependency on fossil fuels by reducing the demand for electricity consumption for heating purposes. The geothermal energy sector in Iceland produces about 27% of the country’s electricity, while hydropower accounts for the rest. From these two sources alone, Iceland produces more energy than its residents use. In 2017, for example, Iceland generated four times more energy than it consumed. The Icelandic green energy market will grow further once the country invests in wind energy infrastructure, which is currently an underutilized resource in the island nation.  The potential for harnessing wind energy and the existing surplus of energy produced show the vast amount of renewable energy resources available in Iceland, as well as the possibility to export excess green energy.  Although there is no current way to export Iceland’s surplus green energy to other parts of Europe, NorNed, a 580 kilometer submarine power cable connecting Norway and the Netherlands, illustrates the possibilities for Iceland to export renewable energy across Europe.  While Iceland is now a model of clean energy innovation and finance, only fifty years ago the United Nations considered Iceland to be a developing nation. Iceland’s clean energy transition was brought on by the 1973 oil crisis, which forced Iceland to build out energy infrastructure that could take advantage of the country’s available renewable resources. Although Iceland still has a lot of progress to make in implementing renewable transportation solutions, the country illustrates how quickly a nation can transition from being a developing economy to a global clean energy leader.  

In contrast to Iceland, China is an example of how a country may use renewable resources to supply electricity in a more robust energy market. China leads the world in total renewable energy production, specifically in wind and solar energy generation. China now invests more money than any other country in the renewable energy sector and also installs solar power systems at lower cost than comparable fossil fuel-powered facilities. China’s interest in renewable technologies was spurred on by the country’s smog crisis and the costs incurred from air pollution. In 2012, air pollution cost China $535 billion, which represented 6.5% of the country’s GDP at that time.  Pollution also contributed to approximately 1.6 million deaths, representing about 17% of all deaths in the country. Environmental issues were a major driver for mass protests because pollution imposed significant economic and social costs on Chinese citizens. In an effort to maintain domestic stability and to minimize protests, the Chinese government pushed to transition the country to renewable technology. China focused on renewables because by alleviating dependence on fossil fuels, the nation was able to mitigate geopolitical tensions associated with China’s deployment of military forces in securing fossil fuel trade routes. In harnessing their own renewable energy, China has been able to reduce their investments in protecting trade routes. To date, the Chinese government has invested more than $360 billion into renewable energy projects and has created 13 million jobs in the sector, which far outpaces the 800,000 workers in the same sector in the United States. China’s private sector has also embraced the country’s transition to clean energy. China’s continued investment and commitment to green energy technology have sent positive signals to the world that the nation is taking action to address its climate impacts as called for under the 2015 Paris Agreement. Although China has a long way to go in transitioning their energy system and still remains the world’s largest polluter, they are demonstrating how a large industrialized nation can successfully transition to renewable energy.  

Timely implementation of sustainable energy solutions on a global scale requires long term commitment and cooperation from all nations. Governments cannot afford to wait until crises hits befire they implement green energy initiatives, as Iceland and China did. In 2015, there were 1.3 billion people in the world who lacked access to electricity and another 2.6 billion people who relied on energy produced from polluting sources like wood, coal, charcoal and animal waste. As nations expand their electric systems, they must simultaneously incorporate renewable energy solutions into their grids. China is now demonstrating that incorporating renewable energy solutions can be economical on a national scale. The country’s 2019 Frontrunner solar project was the first solar installation in China to not receive government subsidies and still come in at a lower cost than competing fossil fuel resources.  

The subsidization of traditional fossil fuel resources continues to present a major roadblock to deploying renewable energy infrastructure across the globe. The International Monetary Fund (IMF) has suggested that fossil fuel subsidies need to be phased out over time because they primarily benefit upper-income groups and mask spending and economic inefficiencies in the fossil fuel market. To address these issues, the IMF recommends creating long term objectives and plans, increasing transparency and communication about the scale of subsidies across countries, phasing in incremental price increases to fossil fuel energy sources, creating targeted efforts to protect the poorest parts of the global population, and creating reforms to depoliticize energy pricing. These lofty IMF goals show that significant international collaboration is necessary to successfully transition to renewable energy and address the inequitable impacts that the transition may have on the world’s most vulnerable populations. Despite these challenges, the cases of China and Iceland show that creative energy solutions are available and can create domestic benefits beyond simply producing “cleaner” electricity. The transition to renewable energy can produce economic benefits, help increase domestic security, spur the development of new industries, create jobs, save lives, and revitalize national economies. Other countries should not wait until change is necessary, like Iceland and China did. Rather, it is imperative that the nations of the world view those two countries as examples of what is possible and embark on their own energy transitions.

The posts published on Charged Debate reflect the writers’ opinions in their individual capacities, and do not necessarily reflect the perspective of the Green Energy Institute at Lewis & Clark Law School, Lewis & Clark Law School, Lewis & Clark College, or the writers’ past, present or future employers or other associations. Any legal information presented on Charged Debate is meant purely for general educational purposes and is not intended to provide legal advice and should not be relied upon in any legal matter.