Iceland to hike tourism tax to tackle the climate impact of increased travel

Iceland is turning to taxes to reduce the impact exponential growth in tourism has on its pristine wilderness, Prime Minister Katrin Jakobsdottir said.

“Tourism has really grown exponentially in Iceland in the last decade and that obviously is not just creating effects on the climate,” Jakobsdottir said in an interview with Shery Ahn on Bloomberg Television from New York on Wednesday.

“Also most of our guests visit our unspoiled nature and obviously that creates a pressure,” she said. One way to tackle the climate impact of increased travel is to raise taxes for those who stay in the country, though the levies won’t be high “to begin with,” said the north Atlantic island’s 47-year-old leader.

Tourism is one of the Nordic country’s biggest industries. The island, which calls itself the land of fire and ice, attracts travellers who come to see lava flows, hot springs, geysers and waterfalls. It’s also a busy air-travel market due to its strategic location in the North Atlantic between Europe and North America.

The industry that generates about 6% of Iceland’s gross domestic product has a key role in the country meeting its climate pledge of being carbon neutral by 2040.

“A lot of the companies working in the tourism sector are finding ways to really turn over to circular economy,” and take action to reduce the use of fossil fuels, such as begin using electric cars, the prime minister said. “So that change is happening but it is a challenge.”

Some “very concrete steps” have been taken in response to climate change since her government took office in 2017, Jakobsdottir said. Iceland is tapping geothermal heat for heating and electricity, it’s subsidizing the green transition, improving energy efficiency and is working on carbon capture.

With all that said, “we aren’t doing enough,” she said. “It’s very clear that all nations need to accelerate their climate action.”