Long‐lived crustose coralline algae are important ecosystem engineers and environmental archives in regions where observations of climate variability are sparse. Clathromorphum compactum is a cold‐water alga that precipitates calcite that serve as archives of change at annual to sub‐annual resolution. Understanding how environmental variability impacts the growth of this species is imperative for application in paleoclimate research, and for evaluating its vulnerability to change. Here, we present the results of the first, to‐our‐knowledge, controlled laboratory experiment isolating the effects of light, temperature, and salinity on calcification rates of C. compactum. Algal calcification rates were modulated by a combination of light exposure, salinity, and temperature, where temperature and salinity were positively correlated, and light level was negatively correlated with calcification rate. Linear extension of the skeleton also varied with treatment conditions, with the epithallial and perithallial layers of skeleton responding differently. Epithallial extension increased with salinity, while perithallial extension was governed only by a positive parabolic relationship with temperature. These results suggest that C. compactum growth will be impacted by environmental changes predicted for the Arctic over the coming decades. While increased temperature in the region may facilitate calcification in the algae, reductions in salinity associated with increased sea ice melt, and potentially increased light levels, may counteract this effect. The negative impact of increased light levels on algal calcification observed may not reflect the true impact of light availability on growth associated with a lengthening of the growing season (not evaluated in this study) accompanying reductions in annual sea‐ice.