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Iceland has a much more temperate climate than its latitude (~65 degrees) would suggest, thanks to the North Atlantic Current bringing relatively warm water/air so far up north.

There is a lot of geothermal activity (geysers, volcanoes) in Iceland, because it lies on the boundary between the Eurasian plate and the North American one. They generate a lot of heat, at least locally. I'm curious and haven't made any calculations (I wouldn't even know where to begin) but does this activity influence the climate in Iceland in a meaningful way? E.g. without the geothermal activity, would the mean annual temperature drop, and if so, by how many degrees?

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Since micro climates of a location are mostly based on temperature and precipitation patterns, I would suggest that yes, if focusing on precipitation alone, one would expect rising heat from geothermal activity off the surface as a variable to affect the formation and release of precipitation. But one would have to check what part of the island geothermal activity was highest as the jetstream would drag weather west to east if nearby, and given that it is a small island, may not record such an occurrence as a significant effect from the rising heat available around Iceland. I did find this article which is somewhat supportable of a heat increase around Iceland due to geothermal activity > Douglass/Patel and Knox, 2005. GEOPHYSICAL RESEARCH LETTERS, VOL. 32 https://agupubs.onlinelibrary.wiley.com/doi/pdf/10.1029/2004GL021816

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You have already hit on the reason Iceland has such a mild climate: the Gulf Stream. Geothermal heat does not measurably affect the Icelandic climate unless you make your measurements very close indeed to geothermal activity. A lot depends on whereabouts you are in Iceland. The interior is mountainous and therefore colder, while the northern coast is nearer the Arctic Circle. It has been decided that Reykjavik, on the south-west coast, is the best place to make climate measurements rather than on a mountain glacier or on top of a geothermal heat source. Major volcanic eruptions are few and far between.

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