Yes, dust devils can happen in moist, cool Iceland! A large field of black, alluvial, volcanic sand, heated several hours under summer sunshine, can generate enough shallow instability to spin up dust devils–even in air that feels chilly to the touch. [Mars has these too. Its atmosphere is over 100 times thinner than Earth’s at the surface, and rivals Antarctica for coldness, but its gets dust devils also. Even such thin gas can blow fine dust around when the surface warms up enough in sunshine enough.] The dry convection that generates dust devils is about the change in temperature with height, more than the temperature itself. So is the shallow, moist convection of “steam devils” over water.
18 ENE Vik, Iceland (17 Aug 14) Looking W
63.501, -18.1078