Which country is home to the world's northernmost capital city, which is powered almost entirely by geothermal energy?

The correct answer is C.

Iceland is home to Reykjavik, which is the world's northernmost capital city of a sovereign state. Iceland is renowned for its extensive use of geothermal energy, which powers a significant portion of the country, including heating and electricity in Reykjavik.

The final answer is $\boxed{\text{C. Iceland}}$