Carbon offsetting in Iceland: cautionary tales

Greenwashing is a common accusation directed at projects that lie about, or grossly exaggerate, their positive environmental impact

The Icelandic voluntary carbon credit market has developed rapidly in recent years, driven by increasing pressure on companies to demonstrate climate and mitigation action, as well as growing expectations around the path toward carbon neutrality.

But when looking back at the history of the Icelandic market, a clear pattern emerges: big promises, weak methodology, and highly inconsistent project quality. This article concerns only the voluntary carbon credit market, not compliance carbon markets, emissions allowances, or ETS systems. Icelandic carbon offsetting has some history in forestry, land reclamation, and later newer climate projects, but in recent years the quality, methodology, and credibility of projects have varied enormously.

projects

Kolviður was one of the first major Icelandic carbon projects to gain broad public recognition and played an important symbolic role in introducing the “carbon offsetting” ideology to companies and the general public. However, for a long time the market relied more on trust and good intentions than on strict international certification, measurement, and regular verification.

To this day, Kolviður does not have formally registered certified carbon credits in the sense used here, nor within the general understanding of the responsible carbon market industry. For example, Kolviður does not meet one of the core pillars of responsible carbon offsetting, as defined by ICROA, the GHG Protocol, Verra, ISO 14064, and the Icelandic ÍST TS 2022:92 standard for responsible carbon offsetting. [0, 9]

That pillar includes such insignificant small details such as registering each certified carbon credit only once in an official carbon registry (like the Verra Registry or ICR) and when the credit is used, retiring it formally only once from that registry. Turns out, it's actually fairly important because otherwise it becomes very easy to double count and double use the same credit (and same emission reduction activity).

Later came projects that promised enormous (we're talking millions of tons / credits) climate impacts but were built on weak or highly indirect carbon logic.

SoGreen, now Katla Carbon (a vast improvement if you ask me) was built, and appears still to be built, on long, complicated, and indirect modelling assumptions about girls’ education, fertility changes, and avoided future emissions over decades, rather than reliable and scientifically measured emissions reductions. The project may have social value, although the author personally considers the project ethically questionable as well, but those considerations fall outside the scope of this article.

From the perspective of the carbon market, however, it was primarily a story-driven avoidance project with a social-impact angle, decorated with emotional imagery of the project’s front figure, Guðný Nielsen, together with various groups of girls in Africa. The project relied on assumptions about the future rather than measurable carbon emissions in the present, all assembled into a draft methodology that was never officially registered nor approved by any recognized institution.

That still did not stop the project from accepting money from numerous supporters, including EFLA, Landsbankinn, and Sjóvá, some of whom proudly claimed they were already “offsetting their emissions through the education of young girls,” a statement roughly as dangerous as Spotify’s claims around Running Tide, discussed below, or the “offset yourself at the pump” slogans used by Olís and Orkan, for which both companies were fined by the Icelandic Consumer Agency. [1, 2, 3]

VAXA took a different route, but ran into a very similar credibility problem. The idea was that Spirulina food supplements produced in Iceland would nutritionally replace beef consumption elsewhere in the world and thereby avoid future emissions from livestock production. The project developed its own methodology and presented theoretical climate claims of nearly 7 million tonnes of CO2e annually, specifically 6,878,998 tCO2e according to its own project documents. These are enormous claims, especially when compared to the actual physical scale of the Icelandic operation, which was based on a relatively small production facility at Hellisheiði power plant and measurements of Spirulina production in kilograms rather than any directly measured reduction in cattle farming or meat production elsewhere in the world.

Although the project received technical validation within ICR, the logic relied primarily on behavioral change, nutritional modelling, and assumptions about dietary substitution rather than direct measurement of emissions reductions. In reality, the project verified only the amount of Spirulina produced, its nutritional value, and certain production variables, not whether beef consumption had actually declined, whether cattle production had been reduced, or whether emissions had truly been avoided. The core climate claim was therefore not a measured reduction in emissions, but a very long chain of causality: that similar nutritional value would eventually lead to dietary changes which would then reduce livestock emissions.

The evidence supporting that substitution claim was paper thin. Demonstrating similar levels of protein, iron, and vitamin B12 is not the same thing as demonstrating actual displacement of global beef consumption or a reduction in cattle production. That was the project’s central weakness. For many market participants, the gap between the real scale of the Icelandic operation and the size of the carbon claims was simply too large.

Possibly for that reason, the project appears to have stalled and remains paused on ICR under the label “Project is under assessment.” It also appears that no buyers have retired credits from the project since 2024, suggesting that the market itself struggled to trust the climate claims for full and responsible carbon offsetting. [4]

The infamous Running Tide became the single biggest warning case in the short history of the Icelandic carbon market. Massive ambition, enormous media coverage, and gigantic future assumptions created a powerful image of revolutionary ocean-based carbon sequestration.

But the methodology, also written by the company itself, proved weak, delivery of carbon credits remained unclear despite extensive forward sales, including to Spotify, which loudly claimed to have already offset through Running Tide, and the project eventually collapsed under the weight of weak scientific grounding and hard, but fair, investigative reporting by Heimildin.

The case severely damaged trust in mitigation projects and demonstrated how quickly marketing can outrun scientific rigor. [5]

When looking across the Icelandic voluntary market today, relatively few projects remain that are built on simple, understandable, and measurable climate action supported by carefully developed methodology grounded in decades of scientific research and operational experience.

A few projects stand out

YGG Carbon likely stands among the strongest compared with many other projects in the market, with buyers including Norðursigling, Norðurál, Íslandsbanki, and Deloitte. Based on multiple projects utilizing the Skógarkolefni methodology (as well as one project in very slow development via Gold Standard[11]) their projects build on more conventional forestry and carbon logic with a clearer connection between action, sequestration, and future carbon credits. Although it still involves future sequestration, the project sits much closer to conventional international carbon markets than many of the story-driven projects previously introduced in Iceland. [6, 10]

Ísorka is also a strong and real example of an Icelandic emissions reduction project offering certified, active carbon credits. The project is certified, registered, validated and verified, and built on real, measured emissions reductions inside Iceland using reliable and verified fossil fuel displacement factors combined with recorded kilowatt-hour volumes flowing through EV charging stations in Iceland.

All credits are registered in the official Verra Registry, and when credits are sold and retired, their movement and retirement can be seen directly in the registry. The project has already sold thousands of credits, with buyers including Hagar, Verkís, BL, Pipar/TBWA, Hópbílar, Reitir fasteignafélag, and others. [7]

Note that the author led the certification process for the Ísorka project and should therefore be considered biased regarding the topic.

Next up in Iceland

Several wetland-related projects are currently developing in Iceland. One pilot project from Votlendissjóður uses an international wetland methodology from Verra, while several additional projects from Land og skógur are expected to use the Mýrkol methodology developed internally in cooperation with ICR.

What separates Votlendissjóður from many earlier projects is primarily caution, scientific discipline, and a focus on real-world measurement rather than grand narratives or theoretical future modelling. The project is built on well-established climate logic: drained wetlands emit carbon, and wetland restoration directly reduces those ongoing emissions.

The project has placed heavy emphasis on baseline measurement and data collection before issuing carbon credits. This includes a two-year baseline measurement period using dozens of automated water-level meters recording conditions at five-second intervals. That approach is far closer to a conventional scientific environmental project than many of the climate projects previously introduced in the Icelandic voluntary market.

It is also important to note that Votlendissjóður itself stopped the sale and marketing of “carbon offsetting” until the project could be rebuilt around real certified carbon credits and more robust methodology. That alone suggests a level of professionalism and understanding of where the market is moving: away from broad climate claims and toward increasing demands for transparency, measurability, and verifiable credits. [8]

It is also worth watching the development of the Heartwood Afforested Land project, which aims to establish a large-scale, internationally certified afforestation project in Iceland under the Verra VCS system. Unlike many older Icelandic forestry projects, the project has been structured from the beginning around international requirements for baseline measurements, additionality, verification, registration, and long-term monitoring.

The project utilizes Verra’s VM0047 methodology for afforestation and land restoration and has also explored integration with wetland methodologies for drained peatland areas within the project boundary. What makes the project particularly interesting is not only its scale, but also the fact that it attempts from the outset to connect Icelandic forestry to a real international carbon market rather than relying solely on a domestic “carbon sequestration” narrative. [11]

The conclusion is simple. The Icelandic voluntary carbon market has had enough of big promises, weak assumptions, and unclear future credits. What is needed now are projects that are grounded, measurable, certified, and traceable.

Author

Aríel Jóhann Kessler Árnason

Founder of Súrefni Certified Credits, surefni.isSpecialist at EFLA Consulting Engineers, Environment and Certification TeamLed Iceland’s first two Verra projects, including the country’s first certified active carbon credits through the Ísorka project