Can We Place A Price Tag On The Central Highlands?

The Icelandic Environment Association and the Iceland Nature Conservation Association (INCA) recently held a conference to bring together a diverse group of people to discuss the value of Iceland’s Highlands. Arguably the most interesting thing to come out of the conference was an attendee’s estimate that the Highlands were worth 80 billion ISK.

Sigurður Jóhannesson came up with the figure by extrapolating the findings of German economist David Bothe, who, in 2003, asked a sample of 1,000 Icelanders how much more they would be willing to pay for electricity in exchange for leaving the Highlands around Kárahnjúkar dam in East Iceland untouched. He found, with a response rate of 33.6%, that Icelanders considered the economic value of the land, untouched, to be two billion ISK. Taking into consideration the rise in the Consumer Price Index, and the fact that the total size of the Highlands is some 20 times larger than the area around Kárahnjúkar, Sigurður argued the highlands were worth at least 80 billion ISK.

“The value of the Highlands is more than just the sum of its parts. Moreover, any evaluation of the highlands must take into consideration the explosive growth of the tourism industry in the past few years.”

This calculation marks the first step towards a cost-benefit analysis in the discussion of conservation versus different uses of Icelandic nature. Since 2000, new projects must go through an environmental impact assessment, and the energy companies perform economic feasibility studies, but to date no attempts have been made to compare the economic benefits of different land uses.

With growing tourism this question is becoming more pressing. As Chair of the INCA board Árni Finnsson points out, it has become more obvious that electricity generation for industry, especially large aluminum smelters, adds remarkably little to the Icelandic economy. “The tourism industry has grown by leaps and bounds,” he says, “too fast for the authorities to respond adequately, and to ensure that the natural resource which attracts all the tourists is protected.”

Considering the growth of tourism in recent years, some have argued that the 80 billion figure is a low estimate. Although contingent valuation is widely used in assessments of environmental damage in the US, such studies require a very careful design and more than 327 responses. Moreover, it seems questionable that one can simply multiply the findings from Bothe, as Sigurður does. The value of the Highlands is more than just the sum of its parts. Moreover, any evaluation of the highlands must take into consideration the explosive growth of the tourism industry in the past few years.

Especially considering the fact that in 2014 the export earnings from tourism were 303 billion ISK, and since 80% of tourists name the natural beauty of Iceland as their main reason for visiting, it seems reasonable to assume the annual contribution of the Highlands to Icelandic GDP might be close to 80 billion.

Others, however, have questioned the whole premise of assigning any kind of price tag to untouched wilderness. In response to the idea that the Highlands are worth 80 billion ISK, Andri Snær Magnason, a best-selling author and environmental activist, wrote on his Facebook page: “Tell me how much your grandmother costs per pound, the square meter of your sweetheart and then calculate the value of your best friend in cars. Before you do that I don’t know what currency to use.’”