6. Iceland

Iceland's inland wetlands span an estimated 9,000 km², accounting for roughly 20% of the nation's vegetated land area.

Arnalds et al. (2016)

Drained wetlands are estimated to account for up to two-thirds of Iceland’s greenhouse gas emissions; across the country, drainage trenches extend for approximately 34,000 kilometres.

Nordic cooperation (n.d.)

Wetlands are found in various states of degradation, with approximately 50% having been disturbed, mainly due to agricultural activities. Like other Nordic countries, Icelandic governments have since the 1940’s encouraged farmers to drain wetlands for agricultural purposes, starting with fields for cultivation followed by large-scale draining of pastures.

Stjórnarráð Íslands (2016)

Historically, governments, including Danish and Icelandic authorities, have played a significant role in financing the drainage of wetlands. Grants covered approximately 65–70% of costs for much of the twentieth century, primarily to enhance agricultural productivity and welfare, particularly for Icelandic farmers.

Guðnadóttir & Guðmundur (2004)

However, since 2016, the focus has shifted, and wetland restoration has become a part of the political climate strategy.

Umhverfis- og Auðlindaráðuneytið (2016)

Iceland aims to become among the first carbon-neutral countries by 2040, and to reach this goal the following climate objectives have been outlined:

Reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels.
Barðadóttir (2024)
Reduce emissions from sectors not covered by the European Trading Scheme by 35–46%.
Icelandic climate council (n.d.)
Increase carbon sequestration through land use changes.
Umhverfis- og Auðlindaráðuneytið (2020).

6.1 National rewetting policies and objectives

Iceland has established a number of regulations and policies to support rewetting as part of its broader climate strategy, aiming to enhance sustainable land use, reduce greenhouse gas emissions, and promote biodiversity. The administration of wetland restoration in Iceland involves multiple entities. The Ministry for the Environment, Energy, and Climate oversees wetland restoration strategies, while the Ministry of Food, Agriculture and Fisheries manages forestry and land restoration projects following a 2021 restructuring. Implementation of rewetting projects is carried out by Land and Forest Iceland, a consolidation of the Icelandic Soil Conservation and Forestry Agency established in 2024.

The overall budget earmarked for wetland restoration is unclear, as it is difficult to separate from other restoration activities. However, during the last term, the government allocated an additional €173,000 annually for wetland rewetting.

Table 7 outlines the most relevant policies for rewetting in Iceland which are described further in the subsequent sections.

POLICY	KIND OF MEASURE	RESPONSIBLE ACTOR	SOURCE OF FUNDING
Iceland's Climate Action Plan 2020 (Aðgerðaáætlun í loftslagsmálum)	Action plan	Ministry of the Environment, Energy and Climate	State budget
Iceland’s Climate Action Plan 2024 (Aðgerðaáætlun í loftslagsmálum)	Action plan	Ministry of the Environment, Energy and Climate	State budget
National Planning Strategy (2024) (Landsskipulagsstefna)	Planning strategy tool for managing all planning in Iceland and its content.	Government of Iceland	State budget
National Strategy for land restoration and forestry (2022–2031) (Land og líf - Landgræðsluáætlun og landsáætlun í skógrækt)	Voluntary funding scheme – individuals, companies, or organisations	Ministry of Food, Agriculture and Fisheries	State budget
Five years action plan for land restoration and forestry (Land og líf - Landgræðsluáætlun og landsáætlun í skógrækt Aðgerðaáætlun í landgræðslu og skógrækt 2022-2026)	Voluntary funding scheme – individuals, companies, or organisations	Ministry of Food, Agriculture and Fisheries	State budget

Table 7: Key policies governing rewetting in Iceland.

Iceland’s 2020 Climate Action Plan

Iceland’s 2020 Climate Action Plan emphasises wetland restoration to reduce greenhouse gas emissions. In the plan, restoration of wetlands has been estimated to contribute with a decrease of greenhouse gas emissions corresponding to 107 tons CO₂e.

Umhverfis- og auðlindaráðuneytið (2020)

It is assumed that the annual reduction of emissions through reduction of wetlands is 20 tons CO₂e/ha.

The Climate Action Plan set an ambitious target to increase wetland restoration from an average of 45 hectares annually (2016–2018) to more than 500 hectares in annually in the years 2019–2022.

Umhverfis- og auðlindaráðuneytið (2020).

However, progress has been slow, with only 166 hectares restored in 2021, falling short of the target and reflecting the significant challenges in achieving these goals.

Hauksdóttir, I. (2022)

In total, a minimum of €0.31 billion was set to be spent on key climate action in the period 2020–2024 (Iceland’s 2020 Climate Action Plan, 2020).

Iceland’s 2024 Climate Action Plan

The Climate Action Plan was revised in 2024. The new Climate Action Plan is structured into four sections:

Umhverfis-, orku og loftslagsráðuneytið (2024)

Community emissions (based on the EU’s Effort Sharing Regulation (ESR).
Trading system (based on EU’s Emissions Trading System (ETS).
Land use (LULUCF).
Cross-sectoral actions (financial and social actions for systemic change).

Each section contains a number of actions, including timeline, responsible authority and status for these actions. The LULUCF section focuses on greenhouse gas emission reductions from land use and features two actions on wetland restoration:

Umhverfis-, orku og loftslagsráðuneytið (n.d.)

L.1.B.1. Rewetting state-owned land. This measure will contribute to the area-based goal of rewetting until 2030. The Ministry of Food, Agriculture and Fisheries is responsible for the action.
L.1.B.2. Creating a carbon credit methodology to encourage restoration. This action is meant to provide framework and incentive for private parties to contribute with funding to wetland projects. Development of the methodology is carried out 2023-2025 by the Ministry of Food, Agriculture and Fisheries.

The Icelandic government has actively discussed rewetting state-owned land in recent years. However, no decision has been made to dedicate public land for this purpose.

Ministry of Food, Agriculture and Fisheries, personal communication, November 13, 2024

The main reasons cited are existing regulations mandating the use of public land for agricultural purposes and ongoing conflicts between governmental agencies.

National Planning Strategy

The Iceland National Planning Strategy for 2024–2028, also known as Landsskipulagsstefna, provides a framework for land management and spatial planning under the Planning Act. Adopted by Parliament, this strategy promotes responsible land use while safeguarding natural landscapes and cultural assets. Wetland protection and restoration are integrated into spatial planning requirements, and the strategy outlines the implementation of these policies to prevent environmental degradation and overuse. The strategy aligns land-use planning with sustainable development objectives.

Alþingi (2024)

National Strategy for land restoration and forestry

The National Strategy for land restoration and Forestry, Land og Líf, outlines a comprehensive land-use framework for 2022–2031 developed by the Ministry of Food, Agriculture, and Fisheries. This strategy identifies wetland restoration as a key objective, targeting the restoration of 5,300 hectares by 2026 and 15,600 hectares by 2031. These targets represent approximately 6% of currently disturbed wetlands and are expected to reduce emissions by an estimated 310,000 tons of CO₂ equivalents.

Matvælaráðuneytið (2022)

Five years action plan for land restoration and forestry

To support the National Strategy for land restoration and forestry, the strategy includes a five-year Action Plan for Soil Conservation and Forestry, which comprises 27 actions. Among these, Action 4.6 is dedicated to rewetting drained wetlands to achieve the 15,600-hectare goal.

Stjórnarráð Íslands (2022)

Economic instruments for rewetting initiatives

The main economic instrument for rewetting in Iceland is grants for restoration of wetlands, targeted at private landowners Table 8. Currently, the Ministry of Environment are also looking into developing a Carbon Credit Standard for rewetting, in order to direct private funding towards rewetting projects.

Funding scheme	Responsible authority	Total amount	Maximum support level	Who can apply	Land type
Grant for restoration of Wetlands	Land and Forest	Unknown	Unknown	Private landowners	Directed towards agricultural land

Table 8: Funding schemes for rewetting in Iceland.

Grant for restoration of wetlands

Land and Forest Iceland manages grants for restoration projects based on applications submitted by landowners, including individuals, companies, and organizations.

Island.is (n.d.)

Applications are submitted through an online portal.

Island.is (n.d.)

Once a project application is approved, Land and Forest Iceland carries out a site assessment, mapping the area and planning the rewetting method. A contract is established between Land and Forest Iceland and the landowner, stating that the landowner keeps ownership of the land, and that the wetland restoration activities should continue for 20 years.

Landgræðslan. (n.d.)

Land and Forest Iceland then applies for development permit from the relevant municipality, and if this is granted, organizes restoration activities through entrepreneurs.

Island.is (n.d.)

The grant from Land and Forest Iceland covers costs for the municipal permits and for the actual wetland construction. The landowner does not get compensation for the land. After completion of the construction phase, restoration sites are monitored and re-evaluated one year later to measure progress and ensure effectiveness.

Island.is (n.d.)

Very few applications from landowners for wetland restoration were received during the term of the grant.

Land and Forest Iceland, personal communication, November 13, 2024

Instead, officers from Land and Forest Iceland enter dialogue with landowners and assist them in the grant process. Few applications and large workload for the Land and Forest Officers has resulted in leftover economic funds in the grant program the past grant periods. Unused funds for rewetting may have been redirected to other purposes in the Ministry of Environment.

Ministry of Food, Agriculture and Fisheries, personal communication, November 13, 2024

Developing a Carbon Credit Standard for Wetland Restoration

Currently, the state is supporting the development of a carbon credit methodology for wetland restoration, as highlighted in Iceland’s Climate Action Plan, action L.1.B.2.

Umhverfis-, orku- og loftslagsráðuneytið (n.d.)

This methodology will set criteria for restoration projects to qualify for the issuance of carbon credits, enabling landowners to access private financial compensation for rewetting. The initiative draws on the success of a similar approach in forestry, where the Icelandic Forest Service adopted a UK carbon credit standard (UK carbon code) for reforestation and afforestation. A comparable framework for wetlands is expected to accelerate rewetting efforts, as many companies and individuals are waiting for carbon credit opportunities to engage in these projects.

The work on developing the standard is scheduled to be finished in 2025. The state aims to finalise the standard and allow the private market to lead its implementation, fostering wider participation and upscaling of restoration activities to meet Iceland’s climate goals.

Land and Forest Iceland, personal communication, November 13, 2024

6.2 Rewetting policy evaluations and monitoring

Iceland has a monitoring framework in place for area-based goals as well as for individual rewetting projects. Monitoring of the rewetted area in Iceland is reported in the status reports of the Climate Action Plan. Individual rewetting project implemented through grants for wetland restoration are monitored by Land and Forest Iceland.

Climate Action Plan

Iceland's climate action plan undergoes annual evaluation by a project management group appointed by the minister, as mandated by regulation 786/2024.

Island (2024)

The five-year action plan is scheduled for formal revision in 2026. Each year, the number of hectares of rewetted land counting towards the area-based goal should be presented in the Status report of the action plan. According to these status reports, Iceland rewetted more than 600 ha of wetlands between 2018 and 2021.

Umhverfis-, orku og loftslagsráðuneytið. (2022)

In 2020, 264 ha were rewetted.

Umhverfis- og auðlindaráðuneytið. (2021)

Monitoring of grants for restoration of wetlands

Monitoring of rewetting projects implemented through grants from Land and Forest Iceland involves assessing vegetation and measuring water levels before restoration, where a baseline study is carried out, and one year after restoration.

Ministry of Food, Agriculture and Fisheries, personal communication, November 13, 2024

Water level combined with the size of the restored area is used to estimate carbon sequestration benefits. The projects are not continuously monitored after implementation. The Ministry of Food, Agriculture, and Fisheries expressed in an interview that this monitoring approach is cost-effective.

Ministry of Food, Agriculture and Fisheries, personal communication, November 13, 2024

Land and Forest Iceland also has experimental wetlands where they monitor greenhouse gas fluxes and vegetation. According to Land and Forest Iceland it is complicated to conduct more widespread monitoring of greenhouse gas fluxes from wetlands, because of high cost and risk of breakdown of measurement equipment.

Land and Forest Iceland, personal communication, November 13, 2024

The Environmental Agency are looking into a participatory monitoring approach, where landowners can be financially rewarded for conducting monitoring themselves.

Land and Forest Iceland, personal communication, November 13, 2024

Status reports from the rewetting projects have been published almost every year since 2016. The status report describes the rewetting project area and the progress of implementation of the work. The size of the rewetting project areas per year, derived from the status reports, are presented in Table 9.

Year	2016 Áskelsdóttir (2017). Ársskýrsla – Endurheimt votlendis 2016	2017 Áskelsdóttir (2018). Ársskýrsla – Endurheimt votlendis 2017	2018 Áskelsdóttir (2019). Ársskýrsla – Endurheimt votlendis 2018	2019 Áskelsdóttir (2020). Ársskýrsla – Endurheimt votlendis 2019	2020	2021 Hauksdóttir (2022). Ársskýrsla - Endurheimtar votlendis 2021	2022 Hauksdóttir (2023). Ársskýrsla endurheimtar votlendis 2022
Rewetting project area (ha)	116,5	164	24	149	No data available	107	11,2

Table 9: Land and Forest rewetting project area (ha) per year, 2016–2022.

6.3 Concluding remarks

Currently, rewetting is and integrated part of broader climate action plans and land use plans in Iceland. With wetlands accounting for 20% of the nation’s vegetated land and up to two-thirds of its greenhouse gas emissions, rewetting initiatives are integral to Iceland’s goal of carbon neutrality by 2040. These efforts are supported by policies such as the Climate Action Plan and the National Strategy for Land Restoration and Forestry, which emphasize sustainable land use and emissions reduction through rewetting. Rewetting is part of the nature restoration budget, but distinct earmarked funding is missing, which may limit its financial clarity. Grant programs for landowners and the development of a carbon credit methodology represent key economic tools for incentivizing rewetting, though uptake has so far been limited.

Monitoring actions are in place, but the scope and cost of comprehensive greenhouse gas flux measurements remain challenging. Experimental approaches such as participatory monitoring by landowners may offer solutions to address these gaps.