The main reasons for the lack of railways are the small population outside the capital region, the availability of automobile, bus, and air transportation for inter-city travel, and the sometimes harsh environment.
A 900 mm narrow-gauge railway was used for the construction of the Reykjavík harbour from 1913 to 1928, and was occasionally used for other freight transport during its operation.
In the 2010s, there were new proposals for a light railway system in the capital region and an airport rail link to Keflavík.
[1] The railway system initially operated a network of around 10 km (6 mi) of track, from a quarry outside the city, Öskjuhlíð, from which it ran a short distance to a junction, passing loop, and sidings.
From the first junction a second line ran east around farms to a locomotive depot just outside the city, located close to where the National Hospital, Landspítali, is today.
The 1.5 km (0.9 mi) extension from the depot was constructed, which ran on to a further junction where a short branch line led into a secondary quarrying site.
The railway was operated by two steam locomotives built by the Arnold Jung Lokomotivfabrik of Germany, both of which have been preserved.
Built in the 1890s in Germany, they worked briefly in Denmark before being imported to Iceland in 1913 for the harbour railway project.
[3] A scale model of part of the railway, showing one of the locomotives at work, is displayed in the Reykjavík Maritime Museum.
Minør was the first to be withdrawn, whilst Pioner (which had received a replacement boiler in 1910 to extend its life) continued to operate until the railway closed in 1928.
They later claimed that they were testing the locomotive's performance, because it had already survived their previous experiments of placing coins and planks on the track.
[1] A diesel-operated light railway was built in the early years of the 21st century, in connection with the construction of the Kárahnjúkar hydro-electric power project.
The railway consisted of three trains, travelling around the clock, transporting people, concrete and other items to keep the drilling machines running.
There were no operational locomotives during either documented visit to the railway (in 1984 and 1993),[7] and trains were shunted by hand, by the farm's staff.
In 2003, the idea of an airport railway was dropped and a dual carriageway road (Route 41) was built instead, opening in 2008.
[8] The electrified railway would run double tracked from the airport, roughly parallel to the current road, and would then be in tunnels from Hafnarfjörður, with a terminal at Reykjavík's main bus station BSÍ.
The project would have three stations: There have also been serious proposals for a light rail system for the Capital Region (Reykjavík, Kópavogur, Hafnafjörður).
[11] The mayors of the respective municipalities have agreed to the masterplan and have shown interest in this proposal, which is currently in a planning stage.
[12] In 2019, a funding package was agreed between the central government and municipalities in the Capital Region on the construction of a BRT system, scaled back from original light rail proposals.