The main species used for afforestation in Iceland is the native birch (Betula pubescens). Silver birch (Betula pendula) may be an alternative in lowland areas with increasing temperatures. Seeds are collected in the wild or from planted trees. Other important species in Iceland include Larix sibirica, Larix decidua and the hybrid Larix sibirica x Larix decidua, Populus trichocarpa, Pinus contorta, Picea sitchensis, Picea glauca and Abies lasiocarpa (Christmas trees).

Percentage of seedlings delivered to Icelandic forestry in different species categories in 2019.

The forestry sector in Iceland aims to increase the forest cover from slightly above 1% to 12% within the year 2100. After a steady increase in the number of planted forest seedlings since 1990, a significant obstacle for the afforestation project has been the economic recession starting 2008, causing the seedling market to decline.

After years of cutbacks the afforestation budget started to increase again, a development that must be seen in connection with the plan to reduce carbon emission by increased sequestration and meeting the goals of the Paris Agreement on Climate change. A plan for mitigation of climate change was announced in 2019. It aims at doubling afforestation and revegetation efforts. A system for trade of carbon sequestration is expected to cause a higher private financing of forestry in Iceland in near future.