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You are here: Home / Media / Archive / 2003 / 0313

0313

INCA, International rivers network, friends of the earth international, cee bankwatch network, world wildlife fund international

March 13, 2003

NGOs call on Banks not to Fund Large Dam and Smelter Project in Iceland

An international coalition of 120 environmental organizations today called on private banks and international financial institutions not to provide any funds for the large Kárahnjúkar dam and aluminum smelter project in Iceland. Iceland’s National Power Company and the Alcoa Corporation are expected to sign the project’s power contract on March 15.

If built, the Kárahnjúkar project will consist of nine dams, three reservoirs, a series of tunnels and river diversions, and a 690 megawatt power plant. It is only the first in a series of large new dam projects in Iceland’s highlands that are supposed to power new aluminum smelters. “Kárahnjúkar will destroy unique environmental treasures on Iceland’s Eastern Highlands - the second largest remaining wilderness area in Western Europe”, says Arni Finnsson of the Iceland Nature Conservation Association (INCA).

Alcoa is closing smelters in other parts of the world and is moving to Iceland as part of a cost-saving strategy. The company is interested in tapping Iceland’s cheap electricity, and will not have to pay for the CO2 emissions of its new smelter because Iceland has an exception under the Kyoto protocol. “It is unacceptable to sacrifice a large, pristine wilderness area for producing cheaper aluminum”, says Peter Bosshard of International Rivers Network (IRN). “In its 2001 Vision Statement, Alcoa aspires to become ‘the best company in the world’. Developing the Kárahnjúkar project would clearly be at odds with such a claim.”

Iceland’s National Power Company intends to raise funds for the Kárahnjúkar project from the European Investment Bank (EIB), the Nordic Investment Bank (NIB) and private banks. INCA, IRN, the CEE Bankwatch Network, Friends of the Earth International and WWF’s International Arctic Programme have today called on the EIB, the NIB and all banks that have unded the National Power Company in the past not to provide any funds for he Kárahnjúkar project. The NGO appeal was endorsed by 120 organizations from 47 countries.

“Financial institutions such as the EIB that claim to be environmentally sensitive should not give a penny to this disastrous project”, says Magda Stoczkiewicz of the CEE Bankwatch Network, who monitors the European Investment Bank with Friends of the Earth/International. “NGOs will continue to follow the Kárahnjúkar project, and will hold any financial institution that puts money into it accountable for irreparable environmental damage.” Samantha Smith of WWF's International Arctic Programme, said: "We hope that the Kárahnjúkar proposal is the last time we see such an environmentally irresponsible power development plan see the light of day. What Iceland needs are plans to protect its environment - not destroy it."

Background on the Kárahnjúkar project:

If built, the Kárahnjúkar project will have massive environmental impacts on Iceland’s fragile Eastern Highlands wilderness area. It will irreparably damage a rare oasis of highland vegetation, and will destroy or severely impact sensitive habitats for the pinkfooted goose and other rare birds, almonids, seals, and reindeer. The project’s Environmental Impact Assessment was rejected by Iceland’s National Planning Agency, a decision that was later overruled by the Minister for Environment.

The economic benefits of the Kárahnjúkar project for Iceland are questionable. The National Power Company’s assumptions regarding cost and time overruns and aluminum price trends are optimistic. A thorough economic evaluation commissioned by INCA estimates that (under its lightly different previous parameters) Kárahnjúkar will entail annual losses for Iceland of $36 million.

The Kárahnjúkar project is a highly politicized undertaking, and a divisive issue within Iceland. Three Icelandic citizens and INCA sued the Minister for Environment for overturning the negative decision on the project’s Environmental Impact Assessment. Iceland’s Courts of Law will consider this case in early April. In addition, INCA and an Icelandic citizen filed complaints with the EFTA Surveillance Authority regarding an infringement of the European Economic Area Agreement, asserting that the Icelandic Government unduly subsidizes electricity and aluminum production through a variety of measures.

The Kárahnjúkar dam and a 40 kilometers headrace tunnel from the reservoir to the powerhouse will be built by Impregilo of Italy. Six international consortia recently pre-qualified to submit bids for the electro mechanical contracts of the project.


For further information:

Arni Finnsson, INCA, arnif@mmedia.is, ph +354 897 2437
Peter Bosshard, IRN, powerfinance@irn.org, ph +41 1 491 7021 .
Magda Stoczkiewicz, CEE Bankwatch/FoE International, magdas@foeeurope.org, ph +31 20 622 1369
Samantha Smith, WWF International Arctic Programme, ssmith@wwf.no, ph +47 22 03 65 00

For a list of potential funders and the NGO appeal to financial institutions, including the list of endorsements, visit
International Rivers network

More information on the Kárahnjúkar project, including an independent economic assessment and photos, is available at www.inca.is . Please contact Jóhann Ísberg for copyright, phone +354 554-5553, mobile +354 893-8909.

 

 

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