After touring for 18 months I was excited to return home a few weeks ago to good, solid Iceland and enjoy a little bit of stability. I had done a concert there earlier this year to raise awareness about local environmental issues and 10 per cent of the nation came to it; but I still felt it wasn't enough.

So when I returned I decided to contact people all over the island who had attempted to start new companies and bring in new greener ways of working but had not succeeded. For a long time Iceland's main income was fishing, but when that become uneconomic people started looking for other ways to earn a living. The ruling conservatives thought that harnessing Iceland's natural energy and selling it to huge companies such as Alcoa and Rio Tinto would solve the problem.

Now we have three aluminium smelters, which are the biggest in Europe; and in the space of the next three years they want to build two more. The smelters would need energy from a handful of new geothermal power plants and the building of dams that would damage pristine wilderness, hot springs and lava fields. To take this much energy from geothermal fields is not sustainable.

A lot of Icelanders are against the building of these smelters. They would rather continue to develop smaller companies that they own themselves and keep the money they earn. Many battles have been fought in Iceland on these issues. One resulted in the Environment Minister insisting for the first time that an environmental impact assessment should be carried out before any smelters or dams were built.

And then the economic crisis hit. Young families are threatened with losing their houses and elderly people their pensions. This is catastrophic. There is also a lot of anger. The six biggest venture capitalists in Iceland are being booed in public places and on TV and radio shows; furious voices insist that they sell all their belongings and give the proceeds to the nation. Gigantic loans, it has been revealed, were taken out abroad by a few individuals and without the full knowledge of the Icelandic people. Now the nation seems to be responsible for having to pay them back.

What makes people furious is that those responsible for putting Icelanders in this situation are now the ones trying to get us out of it. Many here want those in charge to resign and allow others to tidy up after them. Most criticism is aimed at Davíð Oddsson, who made himself chairman of the central bank after 19 years as Mayor of Reykjavík and then 13 years as Prime Minister. A crowd is gathering in downtown Reykjavik once a week to demand his resignation.

Then a huge and most spectacular strike came surprisingly from your own Prime Minister. I quote a petition signed by a tenth of the nation: “Gordon Brown unjustifiably used the Anti-Terrorism Act against the people of Iceland for his own short-term political gain. This has turned a grave situation into a national disaster...hour by hour and day by day the actions of the British Government are indiscriminately obliterating Icelandic interests.”

Usually I don't notice politics. I live happily in the land of music-making. But I got caught up in it because politicians seem bent on ruining Iceland's natural environment. And I read last week that, because of the crisis, a number of Icelandic MPs are lobbying for the environmental assessment to be ignored so that the dams can be built as quickly as possible to give Alcoa and Rio Tinto the energy they need for the two new smelters.

Iceland is a small country. We missed out on an industrial revolution and my hope was that we would skip it completely and go straight to sustainable hi-tech options. If anyone could achieve this, we could. There is a wonderful characteristic in the Icelandic mentality - fearlessness, with an addiction to risk-taking to the point of being foolhardy. In music-making, storytelling and creative thought, this risk-taking is a great thing. And after my introduction to a lot of Iceland's small, growing companies, I realise how many of them have shown this fearless approach either in biotechnology or high technology.

Icelanders are highly educated in advanced sciences. We have ORF, one of the best biogenetics company in the world; Össur, an artificial limb-maker; CCP, a computer games maker, and so on. We also have a lot of doctors and health professionals. Because of the hundreds of naturally hot pools all over the island and our (so far) almost untouched nature, Iceland could easily become one big lush spa where people could come and nurse their wounds and relax. If only the Government could put its money into supporting these companies rather than serving Alcoa and Rio Tinto.

Flexibility is important: we will have to live with the three aluminium smelters that are here already and try to find ways of making them greener. But do we need five? In the past, having all our eggs in the same basket has proven far too risky, as we discovered in the days when we got 70 per cent of our income from fish. Now we are facing a disaster from betting everything on finance. If we build two more aluminium smelters, Iceland would become the biggest aluminium smelter in the world, and be known only for that. It would leave little room for anything else. If the price of aluminium falls - as it is doing - it would be catastrophic.

Iceland can be more self-sufficient and more creative - and still have an approach that is more 21st than 19th century. It can build fewer, smaller and greener dams. Let's use this economic crisis to become totally sustainable. Teach the world all we know about geothermal power plants. Support the Icelandic seed companies. Support the grass roots. It may take longer to build and deliver profits but it is solid, stable and something that will stand independently of the rollercoaster rides of Wall Street and volatile aluminium prices.

And it will help Iceland to remain what it is best at: being a gorgeous, untouched force of nature.

Björk's new single is called Náttúra. For more information about the eco-awareness Nattura Campaign go to www.nattura.info

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