I think your definition of tundra may be too limited. Tundra can be applied to any plant community dominated by herbaceous plants (particularly grasses and sedges) where the limiting factor suppressing tree growth is a short, cool growing season, rather than drought.
Well, I would use plains or grassland instead of tundra. I thought that the definition of tundra was a area where the ground was frozen solid all year round except for few meters/feet in the top soil. Anyways, there is almost no such area in Iceland.
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