The seminar addressed the market position and financing of nature-based solutions and was organised by Land and Forest Iceland, in collaboration with the consultancy Deloitte and the International Carbon Registry (ICR). Around fifty people attended the event, which generated informative and constructive discussions. The meeting was also considered valuable for connecting different actors in this field, as participants represented a broad spectrum of stakeholders from both the public and private sectors.

Quality Standards and Certification Initiatives

Ágúst Sigurðsson, Director General of Land and Forest Iceland, opened the seminar. He highlighted the agency’s focus on quality standards, including its work on developing certification systems for carbon credits: Skógarkolefni for afforestation and Mýrkol for wetland restoration. He emphasised the institution’s commitment to quality, which is reflected in new guidelines for land selection for afforestation, responsible species use, and the development of robust research and monitoring programmes.

Jóhann Páll Jóhannsson, Minister for the Environment, Energy and Climate, also addressed the seminar. He discussed Iceland’s new nationally determined contribution (NDC) for climate action to 2035, under which Iceland will set independent goals. The Minister underlined that targets must be realistic and achievable, while all sectors of society must be mobilised to meet them. Specific numerical targets have been set for land use. The government is now exploring how voluntary carbon markets could help Iceland fulfil its obligations under Article 6 of the Paris Agreement, which defines the rules for international carbon markets. It is possible that Article 6 mechanisms could be applied in Iceland’s newly updated NDC.

Linking to the Paris Agreement

Two panel discussions followed. The first began with a presentation by Guðmundur Sigbergsson from ICR, who then moderated a discussion on the role of government and the link to the Paris Agreement. Panel participants included Jóhannes B. U. Tómasson (Environment Agency of Iceland), Finnur Ricart Andrason (Association of Icelandic Municipalities), Gunnlaugur Guðjónsson (Division Director at Land and Forest Iceland), and Helga Barðadóttir (climate team, Ministry for the Environment, Energy and Climate).

Gunnlaugur discussed the development of the Skógarkolefni certification framework, noting that early in the process there was clear interest from the private sector in participating in climate action. Today, dozens of afforestation projects are in the certification process under the Skógarkolefni standard. He also described the development of the comparable framework for wetland restoration, Mýrkol, which recently underwent public consultation. The first project under this system, developed in collaboration with YGG Carbon, is expected to achieve certification around the turn of the year, marking an important milestone in validating the methodology.

The Need for Financial Incentives

The panel also discussed the status of carbon markets within Iceland’s administrative framework. Last year, the Ministry for the Environment, Energy and Climate released a report by a working group on carbon markets titled Carbon Markets – Challenges and Opportunities in Iceland (English summary). Although only recently published, much has changed since then, including a new government and the ongoing revision of the Climate Act—indicating strong momentum in this policy area.

The discussion also addressed the varying levels of engagement among public institutions and municipalities in climate issues. Some have adopted climate policies, while others lack both funding and expertise, as well as access to data about the current status of their emissions and actions. Participants saw potential in increased collaboration and knowledge sharing between institutions such as Land and Forest Iceland, the Environment Agency, and the Association of Icelandic Municipalities.

On the subject of carbon pricing, participants referred to The Climate Casino by Nobel laureate William Nordhaus, who argues that putting a price on carbon is a key instrument in climate policy. Proper pricing of greenhouse gas emissions ensures that the true social cost of emissions is reflected and that investment in solutions is incentivised. A functioning carbon market, Nordhaus argues, is a more effective driver of action than carbon taxes alone—though tax incentives for climate action could further strengthen motivation by allowing deductions for climate-related investments.

Nature-based actions such as those promoted by Land and Forest Iceland offer many benefits beyond carbon sequestration, including enhanced biodiversity and healthier ecosystems. Participants pointed out that these co-benefits should be recognised and valued. Such projects can also create opportunities for municipalities and farmers to engage directly and generate value through certified carbon units. However, there is currently a lack of consistency in how municipalities handle such projects, and obtaining development permits can be difficult, costly, and time-consuming. Participants suggested that developing regional plans in collaboration with Land and Forest Iceland would help identify suitable project areas more efficiently.

Another topic raised was the absence of a formal definition of carbon neutrality in Icelandic regulation—work is underway on this in the Ministry.

The Role of Business and Finance

The second panel focused on the role of the private sector and financial institutions. Gunnar Sveinn Magnússon of Deloitte gave an introductory presentation and moderated the discussion. Panelists included Sveinn Margeirsson (Brim), Ásmundur Skeggjason (Skógálfar), Þráinn Halldórsson (Pension Fund of Commerce), Ragnheiður Björk Sæmundsdóttir (Sporin consultancy, representing the Farmers’ Association of Iceland), and Hilmar Gunnlaugsson (YGG Carbon).

Participants emphasised the importance of open dialogue between stakeholders. Action is needed, they agreed, and one should not fear mistakes or challenges, as these provide valuable lessons. Obtaining traditional financing for carbon projects remains difficult, whether through loans or direct investment.

Farmers and other landowners were described as a highly diverse group with differing priorities but strong interest in participating in climate-related initiatives. It is essential that projects provide tangible benefits and income opportunities for them. Pension funds were said to be following the carbon market developments from the sidelines, as they have all set targets to increase the share of sustainable investments in their portfolios. However, their participation will likely depend on the availability of reliable financial products—such as climate funds or bonds—that meet their requirements for return, risk, and time horizon. Greater predictability from the public sector would facilitate this.

One key obstacle for companies wishing to invest in certified domestic carbon credits is uncertainty about whether and how such credits can count toward their carbon neutrality targets. Participants agreed that government and business must collaborate to define what constitutes carbon neutrality in Iceland. It is equally important to recognise the value of verified domestic carbon units from afforestation and wetland restoration as legitimate offsets for residual emissions. This would strengthen demand and thereby increase the financing options available for climate projects.

A Work in Progress

Toward the end of the seminar, participants discussed more complex issues such as the potential export of carbon credits for use abroad—under the corresponding adjustment mechanism defined by the Paris Agreement—which could yield higher prices for Icelandic credits. There was also debate about whether Iceland’s national carbon inventory should include removals achieved through projects financed by the voluntary carbon market. These topics are still under consideration by the authorities.

The overall impression of the event was very positive. Both organisers and participants found the discussions insightful, providing a clearer understanding of the state of carbon market development in Iceland and strengthening connections between key stakeholders. The main takeaway was that Iceland is well underway in developing carbon market mechanisms, but further work is needed to create the conditions for carbon projects to gain broad acceptance as credible climate actions and attractive investment opportunities.

As previously stated, Land and Forest Iceland, Deloitte, and ICR are collaborating on a report concerning the market conditions and financing of nature-based solutions. The discussions held at the seminar will undoubtedly provide valuable insights for the report's authors. The publication of this report is anticipated before the end of the year.