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Country profile (Iceland)

What distinguishes the country?

Published: 26 Nov 2010 Modified: 08 Apr 2011


Iceland is an island lying between Greenland and Europe astride the Mid Atlantic Ridge. It is relatively isolated, as the shortest distances to the European continent are 970 km to Norway and 798 km to Scotland.

Figure 1 Distances between Iceland and other countries

Figure 1 Distances between Iceland and other countries

Iceland is the second-largest island in Europe and the third largest in the Atlantic Ocean and its northernmost part is just south of the Arctic circle. It covers an area of approximately 103,000 km². The continental shelf up to a depth of 200 m is approximately 115,000 km², and the exclusive economic zone (EEZ) is approximately 758,000 km². This zone also constitutes Iceland’s jurisdiction as regards pollution control. Land area below 200 m is 24 % and more than half the land area lies above 400 m above seas level. A vast part of Iceland is thus unpopulated central highlands. Almost 88 % of the total area is natural and semi- natural: heath lands 35 %, bare rocks 2 %, sparsely vegetated areas 13 % and glaciers just over 10 % (1).


Agricultural areas cover 2.4% of the country: 97 % is classified as pastures, the remainder being very small patches of non-irrigated arable land and land under complex cultivation patterns (1).



The climate of Iceland is maritime with cool summers and mild winters. The temperature decreases and becomes more arctic towards the interior, partly because of an increase in altitude and partly because temperature in winter decreases further from the shore. A large part of precipitation falls when wind is blowing from east to south. Accordingly, the highest precipitation is found in the south-eastern parts, with estimated maximum annual values of more than 4 000 mm on glaciers. In southwest and west Iceland the yearly precipitation is 1 000-1600 mm in the lowlands at the coast, but only 700-1000 mm further inland. The precipitation is lowest in northern and north eastern districts being 400-600 mm in the lowland areas and less than 400 mm north of the glacier Vatnajökull (2).


Sea currents

The main currents are the Irminger, a branch of the Gulf Stream, which has a temperature of 6-8 °C and a flow of 2 million m3/sec, and the East Greenland, originating in the Arctic, with a temperature of 0 °C and a flow of one to two million  m3/sec (Figure 2). On the continental shelf, a coastal current is created by the mixing of the ocean currents with fresh water from the land, that flows clockwise around the country at a rate of about one million m3/sec. Average runoff from Iceland is estimated as 5 300 m3/sec. The magnitude of the coastal current is 180 times greater than the runoff from land.

Figure 2 Sea currents around Iceland. Unbroken lines denote warm currents - broken lines denote cold currents

Figure 2 Sea currents around Iceland. Unbroken lines denote warm currents; broken lines denote cold currents.



Iceland is a volcanic island predominantly formed of basaltic rock of Quaternary and Tertiary Ages. The oldest basalt rocks – up to 15 million years old – are found in west-northwest and east-southeast Iceland. The neo-volcanic area is confined to an axial zone that runs through the country. Postglacial lava flows cover about 10 % of Iceland and the historical flows account for around one sixth of the lava (2). Between 30 and 40 volcanoes have erupted during historical times in Iceland and in recent centuries an eruption has started on average every fifth year. Iceland is very rich in natural heat – thermal areas are divided into two classes on the basis of the maximum subsurface temperature of the thermal water. Low themperature areas have temperatures below 150 °C at 1 000 m depth, while in high-temperature areas the temperature from the surface down to 1000 m is above 200 °C. Earthquakes are frequent in Iceland – ones larger than 6 on the Richter scale struck in the southern lowlands in both 2000 and 2008.



The population of Iceland is 317 630 (1 January, 2010), consequently Iceland is sparsely populated with only approximately 3 inh./km2. Approximately 90 % of the population lives on the coast and less than 1 000 live above 200 m. Icelanders base their economy largely on the utilisation of marine resources industry and tourism. The most densely populated area in Iceland is the southwest corner, with around 70 % of the population living in the Reykjavík region in Faxaflói Bay. A large part of Iceland's industry is also located in this area.


Economic structure

The mainstays of the Icelandic economy rest on the utilisation of renewable natural resources: large and rich fishing grounds, hydro and geothermal power, and pastureland. The importance and potential of human capital is witnessed by the number of computer software and biotechnology companies.

Fisheries: Traditionally, fisheries form the largest basis of the nation's economy, providing over one third of Iceland's income from exports. Most fishing takes place on the continental shelf. The fishing territory, which is Iceland's main natural resource, requires strict management, and fish catches are tightly controlled. The main species caught are cod, haddock, saithe, redfish, herring and capelin.


Iceland has abundant energy sources in the form of geothermal energy and hydropower. Energy consumption per person is among the highest in the world. About 90 % of all houses are heated with geothermal energy; the remainder being heated mainly by electricity. Eighty per cent of the country's electricity is generated using hydropower; the remainder being geothermally generated.

Heavy industries: The first aluminium plant was built in Iceland in the late 1960s. In the 1970s, the build-up of large industries continued with the construction of of a ferro-silicon plant, and since 1995 there has been a number of new large-scale industrial expansions and projects. The total production capacity of aluminium smelters has increased from 270 000 tonnes per year (tpy) in 2005 to 780 000 tpy in 2008. The power intensive industries consumed about 77 % of electricity produced in 2008 (3). The long-term impact of these investments increased the share of aluminium in total merchandise exports from 20 % in 2005 to roughly 45 % in 2009 (3).


Cultivation is almost exclusively confined to the lowland areas although most of Iceland's land area consists of highlands. Only about 1 500 km2 of this land has been cultivated, mainly as hayfields. Farmers have mostly concentrated on the cultivation of grass, as the land is well suited to this. Conditions for grain growing are difficult due to the cool climate. However, hardy, fast-growing barley types do grow well and are increasingly planted.


The share of tourism in Iceland´s total export revenue was 16.9 % in 2008. Foreign visitors numbered about 300 000 in 2000 and around 500 000 in 2008 and 2009 (4). The forecast of the UN World Tourism Organization (UNWTO) suggests that Iceland can expect 760 000 visitors in 2020 (5).


(1) Corine Land Classification in Iceland 2000-2006. Report in Icelandic.

(2) ICELAND. The Republic. Handbook published by the Central Bank of Iceland. Ed´s: Jóhannes Nordal og Valdimar Kristinsson. Reykjavík 1996.

(3) Economy of Iceland. Report in English.

(4) Tourism in Iceland, feb 2010. Report in English.

(5) Tourism in Iceland, oct 2010. Report in English.

(5) Tourism in Iceland, oct 2010. Report in English.

What have been the major societal developments?

Published: 26 Nov 2010 Modified: 08 Apr 2011

Gross domestic product (GDP) per person 2009: US$ 35 000
Labour force: 185 000 (2010).
Employment by sector (approx): Agriculture: 3 %. Fishing: 3 % Industry: 22 %. Services: 72 %


Iceland was only settled in the ninth century. The majority of the settlers were of Norse origin, with a smaller Celtic element. A general legislative and judicial assembly, the Althingi, was established in 930 and a uniform code of laws for the country was established at the same time. In 1262, Iceland entered into a union with the kingdom of Norway. When the Danish and Norwegian kingdoms were united in 1380, Iceland came under Danish rule, which lasted for more than five hundred years. In 1944, Iceland terminated this union with Denmark and founded a republic. The native language, Icelandic, belongs to the Nordic group of Germanic languages. Iceland has experienced substantial net immigration in recent years, causing the share of citizens of foreign origin to rise to 6.8 % of the total population in 2010 (1, 2).


Economic history

In the course of the 20th century, Iceland has been transformed from one of Europe’s poorest economies, with almost two-thirds of the labour force employed in agriculture, to a prosperous modern economy employing two-thirds of its labour force in the service sector. For most of the last century economic growth was led by the fisheries. Mechanisation had a profound impact when motorised craft and steam-powered trawlers began in around 1905, to replace the old rowboats and sail powered vessels. Consequently, swings in the fish catch and export prices of marine products were the leading source of fluctuations in output growth. A second large scale period of industrialisation started, as previously mentioned, in the late 1960s with the build up of heavy industry and energy production. The post-World War II average annual growth of GDP from 1945 to 2007 was about 4 %. As a consequence of the financial crisis, Iceland experienced a decrease in GDP of -6.5 % in 2009 (1).


Transformation from centrally planned economy to market economy

Market liberalisation, fiscal consolidation, privatisation and other structural changes were implemented in the late 1980s and 1990s. Membership of the European Economic Area (EEA) in 1994 integrated Iceland into the internal market of the EU. According to the Central Bank economic analysis, economic growth started to gain momentum by the middle of the 1990s, rekindled by an increase in fish prices, a global economic recovery, a rise in exports and a new wave of investment in the aluminium sector (1).


Environmental structure


Environmental legislation is raised around two main pillars. One is legislation on environmental protection and pollution control and the other is on conservation. Since the foundation of the Ministry for the Environment, environmental legislation has been reviewed with an eye to its consistency with the guideline of sustainable development.

The Act on Hygiene and Pollution Prevention was first formulated in1969 and was revised in 1981when, for the first time, it put forward a framework for pollution control and the establishment of local and governmental environmental control authorities. In addition, a number of existing acts addressed specific issues under this subject.

The act on nature conservation is framework legislation that sets general criteria and concerns all human interference with nature. The act is also the main legal base for the protection of areas, organisms, ecosystems and biodiversity. The first act on nature conservation was passed in 1956 and the existing act in 1999. Older legislation was for protection of individual species, areas, on forestry and soil conservation (1907) and Thingvellir National Park was protected by law in 1928. An array of legislation exists addressing specific issues under the framework of nature protection.

International cooperation

Various international environmental obligations have had a considerable influence on Icelandic legislation. The biggest changes occurred when Iceland became a member of the European Economic Area in 1994. By its membership, Iceland is committed to introduce the bulk of EU environmental legislation, such as all major directives in the fields of pollution control, toxic and hazardous chemicals, waste management and water quality.  About 40 % of the acts that have been introduced into the Agreement on the European Economic Area concern environmental issues though not in the field of nature conservation. European influence on Icelandic conservation has, however, been significant in an indirect way through the Bern Convention on the Conservation of European Wildlife and Natural Habitats. Iceland is a party to this with its connection, for example, to the Habitat and Birds directives of the EU and the Natura 2000 and the Emerald networks. The convention has had a significant impact on Icelandic legislation and measures, nature conservation and standardized institutional methodology and practices. The Icelandic Institute of Natural History is preparing to join the Emerald Network programme.

Iceland is a party to more than 20 environmental conventions, not including conventions on fisheries or the management of other natural resources. Some of these agreements are international while others are regional. Among the most important global conventions are the UN Framework Convention on Climate Change, the Convention on Biological Diversity, the Convention to Combat Desertification, the Ramsar Convention., the Montreal Protocol and the Stockholm Convention. The UN Convention on the Law of the Sea plays a key role regarding the utilisation of oceanic resources. The Agreement on the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks took effect recently, and Iceland participates with neighbouring countries on the utilisation of migrating species. The Convention for the Protection of the Marine Environment of the North-East Atlantic – the OSPAR Convention – is an important regional convention that was initially aimed at pollution prevention but has recently been developed further and now includes protection of marine habitats.


The Ministry for the Environment's founding in 1990 created the requisites for the government to formulate and enforce an integrated policy on environmental affairs. The ministry supervises all affairs pertaining to nature, conservation and outdoor recreation, the protection of animals, wild-life management, pollution prevention, hygiene and food, planning and building matters, fire prevention, weather forecasting and avalanche protection, surveying and cartography, environmental monitoring and surveillance, soil conservation and forestry.

The Rio Conference on the environment and development in 1992 marked a milestone in environmental affairs, with the states of the world agreeing to work towards sustainable development. The first comprehensive policy of Icelandic authorities on environmental affairs, Towards Sustainable Development, was prepared in 1993 in the spirit of Rio. Following this policy, an implementation plan, Sustainable Development in Icelandic Society, was produced. The Icelandic government adopted a revised sustainable development strategy Welfare for the Future in August 2002: it was revised in 2007. The first comprehensive conservation plan was introduced in 2003 with at its core the presentation of goals relating to environmental protection, the sustainable use of natural resources and the maintenance and improvement of the quality of life. Table 2 shows the relation of some key sectors to the policy goals (3).

Table 1 The relation of some key sectors to the policy goals

Table 2 The relation of some key sectors to the policy goals.


(1) The Central Bank of Iceland, 2008. Economy of Iceland. Report in English.

(2) Statistical Series. Report in Icelandic.

(3) The Ministry for the Environment in Iceland, 2002. Welfare for the Future. Iceland’s National Strategy for Sustainable Development 2002–2020. Report in English.

What are the main drivers of environmental pressures?

Published: 26 Nov 2010 Modified: 24 Nov 2010

Iceland's environmental situation and problems differ from those of other European countries in that it is with a small population and dependence  primarily on natural resources and their efficient and sustainable use. From an Icelandic perspective, suitable indicators for analysing its environmental performance would focus on the management of fish stocks, renewable energy sources and wilderness.


Greenhouse gas emissions

The greenhouse gas emissions profile for Iceland is in many regards unusual. Firstly, emissions from the generation of electricity and from space heating are very low, since they are generated from renewable non- or very low emitting energy sources and secondly, over 80 % of CO2 emissions come from transportation, fishing vessels and industry.

Emissions of greenhouse gases were 4.88 Mt in 2008, an increase of 43 % since 1990. Emissions increased in all sectors except fisheries, -21 %, and agriculture, -2 %. The greatest increase in emissions was from the aluminum industry, +173 %, and road transport, +63 %. In 2008, the energy sector contributed 43 %  – fuel combustion 39 % and geothermal energy 4 % – industry processes 41 %, agriculture 12 %, the waste sector 4 % and other product use less than 1 % (1).

Iceland’s obligations according to the Kyoto Protocol are as follows:

• For the first commitment period, from 2008 to 2012, the greenhouse gas emissions shall not increase more than 10% from the level of emissions in 1990. Iceland´s Assigned Amount Units for the first commitment period amount to 18,523,847 tonnes of CO2-equivalents.

• Decision14/CP.7 on the “Impact of single projects on emissions in the commitment period” allows Iceland to report certain industrial process’ carbon dioxide emissions separately and not include them in national totals; to the extent they would cause Iceland to exceed its assigned amount. For the first commitment period, from 2008 to 2012, the carbon dioxide emissions falling under decision 14/CP.7 shall not exceed 8,000,000 tonnes (1).


Energy use

In 2009, primary energy consumption amounted to 744 GJ per capita (18 toe/capita) (2), which ranks among the highest in the world. There are a number of reasons for this, in particular the high proportion of electricity used in energy intensive industries, a relatively high amount of electricity production from geothermal energy, and substantial energy consumption for fishing and transportation. In addition much energy is used for space heating using abundant geothermal hot water.


Environmental aspects

Further development of hydro and geothermal energy projects faces opposition in Iceland because of conservation concerns. The utilisation of these energy sources needs to take into account nature conservation concerns, which limit their overall utilisation and calls for modification of specific projects. For that purpose, the Ministry of Industry has been developing a Master Plan for Hydro and Geothermal Energy Resources 1999-2009 in cooperation with the Ministry for the Environment. The process has been split in two phases; Phase 1, 1999-2003, and Phase 2, that started in 2004. Phase 1 concluded with a preliminary ruling due to limited research and data. Phase 2 was split into two parts; the first was a continuity stage, 2004-2007, responsible for further research and information gathering, but during the second part, starting 2007, and not yet finished, a new steering comittee regenerated the evaluation process. A number of energy project proposals identified by the National Energy Authority have been evaluated with the best available scientific information, and judged on the basis of economic feasibility, environmental impact, employment and regional development.


The Icelandic economy’s small size means that industrial emissions from even a single project could significantly increase national emissions and therefore Iceland decided to use the provisions of 14/CP.7 under the Kyoto Protocol. Iceland has argued that the utilisation of the country’s clean energy for industry can bring a global atmospheric benefit, as most of the emissions in metal smelting usually come from the energy production, not industrial emissions.

Renewable energy

Iceland aims to be one of the first countries in the world to account for all its energy use from clean and renewable energy sources – it is already a top performier in the use of renewable energy sources. The main part of the energy needed for spatial heating comes from geothermal energy meeting 90 % of the space heating requirements in Iceland. Today geothermal energy and hydropower account for more than 80 % of the country's primary energy consumption. This achievement stands out as an example of the successful implementation of sustainable development policies in the past.



Because of its volcanic activity, Iceland is exeptionally rich in geological phenomena. Several volcanic features are globally rare or of scientific interest. These include waterfalls, volcanoes, hot springs, rock pillars, fossils and minerals. Iceland is also sparsely populated with a central highland plateau, diverse landscapes and extended wilderness. Surveys show that the vast majority of foreign tourists come to experience nature with 40-45 % visiting the central highland.



In 2009, the total catch in Icelandic waters was close to 1.1 million tonnes of fish products worth ISK 115 billion. The fishing industry employs 4.1 % of the total workforce – fishing 2.4 % and fish processing 1.6 %. The export of fish products weighs considerably in the nation’s foreign currency earnings, representing 42 % of total exports in 2009. The fishing industry is still fundamental to the whole economy and the country’s regional development.


The objectives of the fisheries management system are to promote the conservation and efficient use of marine resources and thus to ensure stable employment and economic viability of fishing communities. The national strategy and policy on conservation and sustainable use of the living marine resources is stated in Icelandic legislation and the government’s Action Programme on Sustainable Development (3). It relates directly to marine environmental protection and, together with the Fisheries Management Act, stipulates how to work towards sustainable use and conservation of marine living resources.


The fisheries management system is based on an individual transferable quota (ITQ) system and strict technical regulations on closed areas, mesh sizes and selective fishing gear are an important part of the regulatory framework. The system is intended to limit the total catch and to prevent more fishing than the authorities allow at any given time.


The Marine Research Institute (MRI) conducts extensive research on the marine ecosystem and its living resources. The Institute publishes a status report every year and recommends total allowable catches (TAC) for many stocks. One of the main tasks of MRI is to advise the government on TAC´s and sustainable fishing strategies. The advice is based on the following:

  • stock assessment
  • projection of catches and stock sizes
  • long term management scheme (catch rules)


An advisory board of scientists scrutinises the assessments made by individual scientists of MRI and makes recommendations on TAC´s. The MRI advice for some of the major Icelandic stocks are also reviewed by the Advisory Committee on Fisheries Management (ACFM) of ICES.


Land degradation

The Icelandic volcanic soils, andosols, are extremely friable and erosion is exacerbated by a windy climate. Birch woodland may previously have covered 25 % or more of the country but are now reduced to just over 1 %. A third and possibly up to one half of the pre-settlement vegetation cover may now be either lost or severely degraded.


Altered vegetation composition due to grazing, cutting and burning of woodlands has resulted in reduced vegetation cover, the formation of barren lands and vegetation degradation. Decreased vegetation vigour has led to increased cryoturbation and solifluction processes that accelerate erosion. Vast areas have been desertified by over-exploitation – the speed of erosion magnified by volcanic activity and harsh weather conditions.

The Soil Conservation Service of Iceland (SCS), founded in 1907, is one of the oldest institutes of its kind in the world. It is a governmental agency under the Ministry for the Environment. The main tasks of the SCS include combating desertification, sand encroachment and other soil erosion, promotion of sustainable land use and reclamation and restoration of degraded land. The work is on different levels, from policy making and research, to extension services and management of large- and small-scale reclamation projects.


(1) National Inventory Report 2010. Report in English.

(2) Statistics Iceland:

(3) The Ministry for the Environment. Welfare for the Future. Framework for sustainable development in Icelandic society. Priorities 2006-2009. Report in English.

What are the foreseen developments?

Published: 26 Nov 2010 Modified: 23 Nov 2010

A new nature conservation strategy 2009-2013 was passed by the Icelandic Althingi in February 2010. The strategy‘s main focus is on protection of species, habitats and ecosystems in line with international agreements.

Iceland has started the implementation of the Water Framework Directive.

 Although there is no holistic assessment of sectoral and demographic prospects, there are reports on:

  • future prospects on greenhouse gas emission until 2012 (1) and mitigation report with scenarios until 2050 (2);
  • a report on effects of climate changes in Iceland (2) and the ocean (3);
  • the Ministry for the Environment has just published indicator based report on Sustainable Development (4) with number of indicators based on long time data;
  • a number of future prospects or development plans for the different sectors, as for energy use (5 and 6), for tourism (7) and for transport (8 and 9). Generally, these include demographic and economic data or prospects.


(1) The Environment Agency of Iceland: Greenhouse gas emissions 2008-2012. Report in Icelandic.

(2) Climate Change and consequences. Report in Icelandic.

(3) The Ocean: Iceland´s policy. Report in English.

(4) State of the Environment. Report in Icelandic.

(5) The Ministry for the Environment in Iceland, 2002. Welfare for the Future. Iceland’s National Strategy for Sustainable Development. Report in English.

(6) Prospects for electricity 2009-2030. Report in Icelandic.

(7) Tourism in Iceland in Figures. Report in English.

(8) Road traffic prospects 2005-2045. Report in Icelandic.$file/Umfer%C3%B0arsp%C3%A1_2005-2045.pdf

(9) Road traffic prospects in the Capital area. Report in Icelandic.ðarspár_endurskoðun_2004.pdf


The country assessments are the sole responsibility of the EEA member and cooperating countries supported by the EEA through guidance, translation and editing.

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