4. Iceland

In 2017, the Icelandic government announced its goal of becoming carbon neutral by 2040 (Government of Iceland, 2017). Four years later, this goal was codified in the Icelandic Climate Change Act. In 2021, the government furthermore declared its ambition to make Iceland independent of fossil fuels by 2040 (Government of Iceland, 2021). While all domestic sectors are in principle included in the targets, the role of the LULUCF sector is still being discussed, including aspects relating to the need for improved data (Nordic Council of Ministers, 2023).

Currently, Iceland does not intend to rely on international carbon credits to achieve its carbon neutrality goal, but the matter is under consideration by the government (Ministry of the Environment, Energy and Climate, 2024).

In its most recent Nationally Determined Contribution (NDC) under the Paris Agreement, submitted in February 2021, Iceland committed to cooperating with the EU, its Member States and Norway to achieve a collective 55% emission reduction target by 2030, compared to 1990 (UNFCCC, 2021). Iceland’s collaboration with the EU, its Member States and Norway entails a national target for sectors subject to the EU’s Effort Sharing Regulation (ESR), including road transport, fisheries, agriculture, and waste management. Currently, Iceland’s target under the ESR is a 29% reduction by 2030, compared to 2005, but the target is expected to be increased to around 40% (Nordic Council of Ministers, 2023).

Additionally, the government has independently set a target of reducing ESR emissions by at least 55% by 2030, compared to 2005 (Government of Iceland, 2021).

To meet these objectives, the Icelandic government has outlined approximately 50 actions in its most recent Climate Action Plan from 2020 (Ministry for the Environment and Natural Resources, 2021). The action plan has been under review and a new plan is expected to be published in Summer of 2024 (Interviews, Iceland).

In recent years, the Icelandic government has increasingly emphasized the active involvement of the business and industry sectors in achieving the country’s climate targets. In 2022, the Minister of the Environment, Energy and Climate initiated a collaborative project between government authorities and the business sector, known as The Business Climate Roadmaps.

The primary objective of the Business Climate Roadmaps is to contribute to the development of a comprehensive and realistic plan to achieve Iceland’s climate targets. This involves gaining a thorough understanding of the emission-reducing projects that the business sector is willing and able to undertake, as well as identifying ways in which the public sector can support these efforts (Ministry of the Environment, Energy and Climate, 2023). The aim is to establish a collaboration platform where government officials and business representatives can work together to define, prepare, and implement sector-specific emission reduction targets. An informant from the government’s side described this as an attempt to broaden the ‘ownership’ of climate action in Iceland (Interviews, Iceland).

A key aspect of this initiative is to provide the government with essential information for prioritizing their actions. This includes data on achievable emission reductions in each sector, associated costs, and the current status of technological development (Interviews, Iceland). Additionally, the Business Climate Roadmaps allow businesses to influence public policymaking by sharing their perspectives on suitable government interventions, such as regulatory change, infrastructure development, incentives for green investment, and support for research and development (R&D) and energy transition efforts (Confederation of Icelandic Enterprise, 2024).

Early in the process, a total of 11 sectors joined the initiative. While this initiative covers, directly or indirectly, most of the key sectors in the Icelandic economy, additional sectors may still join the initiative at later stages (Interviews, Iceland).

The Business Climate Roadmap initiative began in the autumn of 2022 as an informal collaboration, primarily focused on identifying key stakeholders and facilitating seminars and discussions within various business sectors regarding their contribution to Iceland’s climate targets. Building on previous private-led initiatives, the aim was to strengthen connections between the public and private sectors and establish a shared vision for future climate action (Ministry of the Environment, Energy and Climate, 2023).

In January 2023, the collaboration was formalized through the adoption of a memorandum between the Minister of Environment, Energy and Climate and the Confederation of Icelandic Enterprise. The memorandum, which is not publicly accessible, specified that each sector would independently carry out the development of its roadmap, and that the project would be overseen by the Confederation of Icelandic Enterprise, which would appoint an overall project manager. Each sector has its own leader, typically the CEO of a prominent company within that sector (Interviews, Iceland).

Engagement on the part of a diverse set of stakeholders was prioritized in order to ensure that the roadmaps would reflect the diversity of Icelandic industries and would foster dialogue about climate efforts within these sectors. According to informants, the distribution of responsibilities and workload was not clearly defined in the beginning, but gradually the role of key actors developed, and the work became more efficient. Informants from both the public and private sectors acknowledge that this was a learning by doing process and that the initiative’s ongoing evolution will include further clarifying the role of each participant (Interviews, Iceland).

As set out in the memorandum, the role of the Ministry of the Environment, Energy and Climate is to facilitate and support the work on the roadmaps. To perform this role a special working group was established, its members hired specifically for this purpose, to collaborate closely with the business sectors throughout the development of the roadmaps. Among this group’s intended tasks were to assist in defining interim targets for each sector and to outline procedural aspects for analyzing and implementing the measures proposed. According to informants, the extent to which this support was utilized varied between sectors, some sectors choosing to hire their own consultants (Interviews, Iceland).

In June 2023, the 11 sectors submitted their roadmaps, each outlining specific goals and proposing actions to reduce emissions within the respective sector. The roadmaps also collectively set forth 332 proposals for public and private measures aiming to contribute to Iceland’s climate objectives (Confederation of Icelandic Enterprise, 2024).

The roadmaps are accessible in Icelandic at a website created for the initiative and operated by the Confederation of Icelandic Enterprise. The roadmaps are built upon previous collaborative efforts of several business associations that issued sectoral roadmaps in 2021. While the earlier effort was initiated by private entities, it was overseen by Green by Iceland (Grænvangur), a public-private partnership established to promote Icelandic climate solutions (Green by Iceland, 2021).

From the outset, it was envisioned that the outcomes of the Business Climate Roadmap initiative would contribute to the development of a new Climate Action Plan. The new plan is expected to integrate sector-specific climate roadmaps for businesses, incorporating sector-specific goals and proposals for emission reduction measures. The roadmaps are considered ‘living documents’, subject to updates. The roadmaps are scheduled to be updated in 2025 (Interviews, Iceland).

As of the writing of this report, a new government climate action plan is pending. The Minister of the Environment, Energy and Climate has declared that the new plan will take the sectoral roadmaps into account. Consequently, there is significant uncertainty regarding the roadmaps’ impact on governmental climate policy. This uncertainty may have contributed to the mixed feedback from informants regarding the initiative’s effectiveness, ranging from somewhat ineffective to somewhat effective. Nonetheless, almost all informants underscored the importance of private sector involvement in shaping public climate policy and advocated for expanding the private sector’s role.

One recurring theme from informants was the need for clearer ‘ownership’, roles, and procedures within the Business Climate Roadmap initiative. It was mentioned that establishing relatively clear objectives early on would have facilitated alignment between the public and private sectors, harmonizing expectations regarding the project’s outcomes and processes. One informant suggested that formalizing the collaboration through a memorandum should have occurred sooner. However, informants also gave positive feedback as to the efficiency of the collaboration, especially in its early phases, and noted that the atmosphere was constructive.

Noting that the memorandum of January 2023 had to some extent outlined how the collaborative process was to be conducted, informants also mentioned that in practice the memorandum has not been fully adhered to. After the publication of the roadmaps, ambiguity persisted about who was responsible for taking the next steps and how proposals would be addressed, indicating, according to some private sector informants, a lack of initiative on the government’s part. This appears to have affected trust between the public and private sector, reported by most informants as moderate or low.

It was specifically noted that while the collaboration was quite effective during the roadmap development phase, uncertainty later arose regarding next steps and the roles of both governmental and business sector actors. At this stage, the involvement of sectoral ministries increased, and some private sector informants experienced a lack of collaboration and harmonization between ministers. Delays in issuing a new climate action plan further exacerbated uncertainty among private sector stakeholders.

Additionally, concerns were voiced that the government had not demonstrated how roadmap outcomes would be used for prioritizing public policy measures, despite this being a primary purpose of the initiative. Nevertheless, most informants believed that public-private collaboration had already contributed to reducing net emissions in Iceland to some extent, albeit only slightly or moderately.

Informants mentioned differences between sectors as to available baseline data and starting points on emissions, technologies, and costs, as well as differences in capabilities to assess achievable emission reductions. These disparities were said to have contributed to the diversity in methodologies and outcomes across the roadmaps.

Despite challenges, informants generally recognize the establishment of formal climate collaboration between the public and private sectors in Iceland as a significant and positive step. It was noted that this is the first time that a formal cooperation on climate action is created between the public and private sectors in Iceland. Informants appear to consider this a step of great importance for Iceland’s future climate efforts, even though the experience so far has left considerable room for improvement. They expressed optimism about the potential for further development and streamlining of the collaboration, underscoring its importance for advancing climate action in Iceland. It was emphasized that the initial round of roadmaps only constitutes a first step, and that further collaboration will be needed to allow the collaboration to evolve and lead to more beneficial results in the future.