This article about Iceland and its ongoing recovery from the financial crash of 2008 was written a month after Roald Marth and I visited Iceland in August 2011.

The Independent

Iceland: The broken economy that got out of jail

The small nation went bust spectacularly. But its recovery has been remarkable, too – and holds lessons for other countries. Ben Chu reports

Iceland experienced one of the most severe recessions in the world when the markets crashed in 2008. Economic output fell by about 12 per cent over two years. But the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016.

The turnaround should not be exaggerated. Iceland is still more than 10 per cent below pre-crisis output levels. Unemployment remains at about 6.7 per cent, considerably higher than before 2007. The standard of living of most Icelanders is well down. Access to foreign currency is tightly controlled. And risks to recovery remain. Central bank interest rates are going up in order to curb inflation. This could stifle growth. Yet the fact remains that the outlook for the Icelandic economy is looking rather healthier than other distressed economies in Europe such as Greece, Portugal and Ireland…  Read the rest

Iceland experienced the biggest financial crash in modern history – yet they are now recovering. They are recovering because they inoculated themselves from high oil prices by using low cost hydro and geothermal for 100 percent of their electricity and house heating. And by utilizing low cost electricity, they made an electricity intensive aluminum export industry.

It is clear to me that had they used expensive biofuel to generate electricity, they would not be competitive in making aluminum for export. And instead of coming out of this disastrous financial situation, they would be facing years of depression. This is exactly why Hawai‘i should not be using expensive biofuels to make electricity when we have low-cost geothermal.

Here are my observations from that trip we took took to Iceland.

I want to conclude my “Iceland Series” by pointing out something very simple and straightforward that they have learned in Iceland and put into practice, but that we in Hawai‘i have not:

Cheap and proven technology, and clean energy projects, protect an economy from oil crises. Read the rest