The report was prepared by Land and Forest Iceland in collaboration with Deloitte and the International Carbon Registry. It analyses market conditions and financing mechanisms for nature-based solutions, with a specific focus on the role of voluntary carbon markets and their alignment with Iceland’s climate commitments. The work forms part of ongoing efforts to support evidence-based policymaking and the development of a credible framework for nature-based climate action.

Strengthening the Link Between Nature-Based Solutions and Climate Commitments

The report responds to two key challenges. First, it addresses barriers that can limit investment in climate action, both in Iceland and internationally. Second, it examines how voluntary carbon markets can be clearly and credibly linked to the objectives of the Paris Agreement, in particular under Article 6.

The report builds on previous work led by Land and Forest Iceland on quality frameworks for nature-based carbon projects, including Skógarkolefni Forest Carbon for new afforestation and Mýrkol Wetland Carbon for wetland restoration. International experience shows that public funding alone is insufficient to meet long-term climate targets. Mobilising private capital requires clear rules, credible standards and incentives that enable companies to integrate climate action into their long-term strategies and investment decisions.

The purpose of the report is to highlight how voluntary carbon markets and nature-based solutions can contribute to Iceland’s national climate goals while supporting innovation, employment and sustainable value creation in rural areas. A wide range of stakeholders were consulted during the preparation of the report, including representatives from government, the financial sector, business and civil society, in order to provide a comprehensive overview of the current situation, opportunities and areas for improvement.

Stakeholder Dialogue and Policy-Relevant Insights

An important part of the process was a stakeholder seminar held on 30 October 2025 at Kjarvalsstaðir in Reykjavík. Representatives from public authorities, the private sector and financial institutions discussed the draft report and its preliminary findings. The discussions focused on two main themes:

• The role of government in linking voluntary carbon markets to Iceland’s climate targets.

• The role of companies and financial institutions in financing and implementing nature-based climate action.

The input received during the seminar informed the final content of the report and underlined the importance of dialogue and cooperation across sectors.

The Need for a Clear and Predictable Framework

The report’s main message to policymakers is clear. Achieving Iceland’s climate goals requires a robust, transparent and coherent framework for carbon markets and nature-based solutions, supported by effective incentives for private investment. Key priorities include:

• Ensuring coordination of policy and regulation across public administration.

• Establishing clear requirements for the quality, registration and use of carbon credits.

• Promoting transparency in national and corporate carbon accounting.

• Aligning domestic standards with internationally recognised standards and encouraging their use.

• Supporting the financing of domestic nature-based projects in cooperation with financial market actors, for example through auction platforms, price-support mechanisms (minimum price for carbon credits), insurance funds and climate funds.

Nature-Based Solutions as an Opportunity

The report concludes that nature-based climate action, such as afforestation and wetland restoration, offers significant opportunities for Iceland. These measures provide cost-effective and multifunctional solutions that support climate mitigation, biodiversity, ecosystem services and resilience to climate change. With clear policy direction, well-functioning carbon markets and coordinated efforts by public authorities and private actors, Iceland can strengthen sustainable land use and nature-based value creation while advancing its climate objectives.

The Report: Market Conditions and Financing of Nature-based Projects (in Icelandic)