With increasing fossil fuel prices in Iceland then there has been an awakening in looking towards other options in meeting the populations demand for fuel, one of these options being an increase in domestic production of methane. The production of methane is based on a biological process called anaerobic digestion and is alike other things biological; dynamic. The raw product of the anaerobic digestion is however not pure methane as it creates biogas which has to be processed further to gain methane of substantial pureness. When engaging in such production then many factors have to be considered and as there is a limited experience of such processes in Iceland then it is necessary to look towards foreign experience and knowledge about the production process and technological innovation. Decades of experience in these matters can be found in many of Northern Europe´s states where a great deal of biogas plants in varying versions can be found. The installment of such biogas plants in Iceland is possible as there exists a adequate supply of material which could be used for such production, such as waste from farming but also in residential and industrial waste. If the aim of the production is to produce pure methane then it is probably unlikely that the operation of smaller production units will be profitable. On the other hand then bigger production units could be profitable due to economies of scale. Biogas and methane could none the less be a eligible and a sustainable fuel option in the long run from an economic-, social- and environmental standpoint.