No, I agree... Which is why we now have this ;)

But logically speaking it makes no sense.

do not think it is an oversight. I believe it is like that to force the player to follow the lore. Alith Anar hates Dark Elves, especially Malekith. Long story short: Malekith ruined House Anars reputation, and killed Aliths father, Eothlir. Nagarythe, once a jewel, was now a ruined, desolate land. The rest of Ulthuan despised the people of Nagarythe, as they considered them corrupted with chaos, even though Nagarythe proved the strongest resistance. The remaining houses of Nagarythe named Alith as their leader, and crowned him the Shadow King.

By making most of Ulthuan unsuitable, the player can focus on destroying Malekith and the dark elves, instead of conquering Ulthuan, by war or confederation.

Reminds me of the oversight on Markus Wulfart having negative effects for occupying temperate climates, which is the Empire's main soil lol. So essentially, owning the Empire as Markus Wulfart is bad

this is for alith anar? I never played him so didn't know he had a climate penalty on ulthuan, what a strange oversight from CA