For more than a decade, the volcanic landscape of Iceland has served as the proving ground for high-ambition climate tech, from carbon management solutions to low-carbon fuels, powered by the island’s abundant geothermal energy resources.
Once ready to scale, companies turned to bigger markets for their first-of-a-kind projects. Nearby mainland Europe, with its stable carbon pricing and decarbonization mandates, was an obvious partner. But throughout the 2010s, the U.S. became an increasingly prominent commercialization destination, as Icelandic pilots drew attention and funding from American sources.
The highest-profile example of the Iceland-to-U.S. pipeline is the evolution of the Swiss carbon removal company Climeworks. Founded in 2009, the company turned to Iceland, with its abundance of clean firm power and geologic storage access, to pilot its tech. Climeworks switched on Orca, the world’s first commercial direct air capture plant, in 2021. The much larger Mammoth facility followed in 2024.
Those plants aren’t without their challenges; Mammoth, for example, is still delivering just a fraction of its nameplate capacity, thanks to “technical difficulties” with the modular containers that draw in air and bind carbon dioxide. But once photos began to circulate of the hulking facilities rising impressively out of the black volcanic gravel at the Hellisheiði geothermal plant in southwest Iceland, they became the face of global progress on engineered carbon removal. They served as a reference point for U.S. policymakers and developers seeking to encourage domestic carbon removal buildout, and gave Climeworks a foundation of accomplishment on which to anchor its expansion into the U.S. market.
In 2023, when the company solidified its plans to build its first-of-a-kind plant, it did so in the U.S., as a partner for one of the Department of Energy’s Regional Direct Air Capture Hubs, supported by the Bipartisan Infrastructure Law and the Inflation Reduction Act.
But the Iceland-U.S. innovation corridor has changed dramatically in the last year, as the second Trump administration ushered in its “energy dominance” agenda. Essentially overnight, the U.S. government stopped being the staunch decarbonization and research partner it once was. Promised funding has stalled, and even without the grid constraints and AI-driven fight for power playing out around the country, first-of-a-kind projects are facing uphill climbs. As a result the domestic prospects for high-cost, large-scale climate or clean energy projects have become uncertain.
The exact fate of Climeworks’ Project Cypress, which found its funding in turmoil last year when the Trump administration canceled Biden-era deals, is still unclear. In fact, following a DOE reorganization late last year, the office that was responsible for the DAC hubs program no longer exists.
But the implications for Iceland’s entire ecosystem of climate startups — and the U.S. role in the global innovation pipeline — are much broader. Companies are beginning to reorient their commercialization plans to go around, rather than through, the American market. And they’re turning to other partners instead.
Europe, of course, still offers a policy environment that is both more stable and more progressive on decarbonization, making it a prime candidate. Iceland, meanwhile, is positioning itself as not just a sandbox but a partner for scale. But another major player, full of well-capitalized companies and an ambitious government intent on growing its clean energy footprint, has emerged in the last 12 months: China.
Turning toward China
The relationship between China and Iceland has a long history. The pair have been collaborating on geothermal heat for two decades, via a joint venture between China’s Sinopec Star and Iceland’s Arctic Green Energy. But the collaboration has deepened in the last year, and developed a more explicit energy transition focus.
In October, for example, Icelandic President Halla Tómasdóttir and Chinese President Xi Jinping issued a joint statement announcing increased intergovernmental and industry cooperation in geothermal and other climate tech sectors. The announcement followed an Icelandic delegation’s visit to China, during which they discussed “the strengthening of research and development ties between the two countries” and affirmed their “shared commitment to advancing renewable energy collaboration.”
In an interview with a Chinese outlet, Tómasdóttir subtly nodded to the change in U.S. policy, and the shifting innovation pipeline: “I like the fact that a small country and a big country have decided to come together at a time where some think they don’t need to work on climate change, and are going to work together with the goal to offer the world solutions,” she said. Iceland is innovative but small, she added, while China is “incredibly good at executing and taking things to scale.”
This evolution is already playing out in real time for companies ready to go for scale.
One example is Carbon Recycling International, an Icelandic company focused on turning captured carbon dioxide and hydrogen into methanol for industries like shipping, aviation, and plastics. The company built its first demonstration plant in Iceland, but is scaling abroad.
In 2019, when CRI was preparing to contract its first commercial plant, the U.S. under Trump 1.0 was experiencing regulatory gridlock and high capital costs. Consequently, the world’s largest CO2-to-methanol plant wasn’t constructed on the Gulf Coast, but in Anyang, China — using Chinese-built electrolyzers.
CRI licensed the tech and engineered the project — which is around 100 times larger than the pilot in Iceland — before passing it off to its owner/operator, Shunli Special Steel. Since then, CRI has unveiled two additional projects in China, which is now the lynchpin of the company’s portfolio.
There’s been “a lot of interest” in licensing CRI’s technology for projects in the U.S., particularly after the passage of the IRA tax credits for green hydrogen, the company’s director of product Ómar Sigurbjörnsson told Latitude during a 2025 site visit.
The 45V clean hydrogen production tax credit, created by the IRA, encouraged a lot of potential developers to look at projects in the U.S., Sigurbjörnsson explained. However, it took more than two years to finalize the regulations, which were then thrown into further uncertainty when Congress took an axe to credits in July 2025. “Projects were on hold, and unfortunately now it looks like many of them won’t proceed because of the change in policies,” Sigurbjörnsson added.
CRI still has its eye on building in the U.S., but doesn’t expect the market to be advantageous for its projects anytime soon.
High barrier to entry
It’s not just decarbonization technologies that are rerouting. Icelandic startups focused on essential tech for the energy transition, including both grid reliability and industrial load management, are finding clearer paths to scale in Europe than in the U.S.
In many ways, this forced evolution is a positive one, explained Nótt Thorberg, director of Green by Iceland, a public-private initiative funded by the government. Rather than waiting for U.S. policy to stabilize, startups are casting a wider net and targeting geographies that are ready for development now.
To be clear, this doesn’t necessarily mean that the U.S. is no longer important to Icelandic companies, Thorberg said. It remains one of the biggest markets in the world, and tax incentives aside, the load growth that the country is experiencing means that there is opportunity for companies with innovative solutions across sectors. Especially for technologies like geothermal where Iceland has a clear technological advantage, she expects that the Icelandic-U.S. relationship will continue to strengthen. For others, she anticipates a “temporary shift” in how and where solutions are deployed, where companies turn to the U.S. a little later than they otherwise might have.
Thorberg’s prediction is already coming true at the line monitoring startup Laki Power, which has developed a suite of sensors, cameras, and icing detection systems designed for harsh environments. Their hardware solves a key challenge in grid maintenance: how to accurately monitor high-voltage lines in remote areas, without relying on external power or batteries that require field maintenance. The tech “harvests” energy directly from the electromagnetic field of the high-voltage lines it monitors, allowing for onsite processing of realtime data, and 99.9% uptime.
The technology would have obvious applications for the U.S. grid, which has struggled with both extreme weather-driven outages and interconnection delays, prompting investment in solutions that enhance existing infrastructure. But so far Laki Power, founded in 2015, has prioritized other markets.
CEO Haukur Örn Hauksson said the company’s current projects in Norway, Turkey, Greece, Argentina, Canada, and Saudi Arabia, started “organically,” via introductions by existing partners and the Icelandic business community.
“You use every avenue possible when you’re a startup, to create these kinds of relationships,” Hauksson explained. The U.S., with its fragmented utility landscape, is definitely part of Laki’s future plans, he added, but for a small hardware company, the barrier to entry is high — especially right now.
Similarly, Snerpa Power is prioritizing Europe’s more integrated markets. The startup’s software platform optimizes industrial loads for large energy consumers like aluminum smelters and data centers, and has already achieved commercial scale in Iceland, where it manages 25% of the nation’s industrial load.
Now, Snerpa is focusing its expansion on Scandinavia and wider Europe. The structural similarities between Icelandic and European power markets made the continent a next logical step, explained CEO and co-founder Íris Baldursdóttir. Snerpa’s work automating multi-site load scheduling and flexibility bidding into the balancing market for data centers in Iceland, she added, is allowing it to scale to multiple sites in Europe more easily.
For now, Baldursdóttir said, deployment in the U.S. remains a “maybe.”
A new era for Icelandic climate tech
Coming out of 2025’s COP30 in Brazil and heading into 2026, Iceland is presenting a different side of itself to the world. It remains a critical testbed for capital intensive, infrastructure-heavy technologies, as well as those with high energy needs. But it’s evolving beyond a climate tech sandbox, and pitching itself as a potential commercialization partner to fill the gap left by the U.S. retreat.
This is a shift highlighted in the company’s “Infrastructure of the Future” campaign late last year by public-private partnership Business Iceland, which positions Iceland as Europe’s premier AI testbed — especially against the backdrop of the U.S. pivot toward fossil-friendly policies and dismantling of clean energy incentives.
In Brazil, there was significant interest in Iceland’s path to becoming a “blueprint of renewable energy success,” and its future role as a strategic scale partner, said Thorberg, who attended COP for the fourth time in November. Iceland is small, she added, but it is on track to enhance its position as a strategic commercial and industrial hub, as well as a technology test bed.
In the coming years, Thorberg said, Iceland will double down on its role as a “green export economy,” as part of the government’s forthcoming economic growth plan, which includes “climate” as a pillar, and is focused on investment, jobs, and domestic deployment over pure decarbonization. That will likely mean an emphasis on the development of industrial parks, expanded geothermal and deep-drilling projects, and industrial decarbonization facilities — both in Iceland, and internationally.
“We’re so agile that we can act as the connector, the lynchpin, between different actors that need to realize and deploy these solutions at scale,” she explained.
(Editor’s note: The reporting for this story was made possible in part by Green by Iceland, which facilitated site visits with several of the companies mentioned in June 2025.)
