The European Commission has proposed a Council decision to establish the EU's position for extending the Carbon Border Adjustment Mechanism (CBAM) to Norway, Iceland, and Liechtenstein, the EEA EFTA states. The proposal, published on 1 July 2026, would amend Annex XX (Environment) of the EEA Agreement to incorporate Regulation (EU) 2023/956 establishing CBAM and Regulation (EU) 2025/2083 simplifying and strengthening the mechanism. The EEA EFTA states would participate with adaptations beyond mere technical adjustments and would also be required to contribute financially to CBAM's operation across the entire European Economic Area via a separate EEA Joint Committee decision.
The proposal is based on Article 192(1) TFEU (environment) in conjunction with Article 218(9) TFEU and Article 1(3) of Council Regulation (EC) No 2894/94. The EEA Joint Committee decision, once adopted, will be binding under international law and published in the Official Journal. The extension formalises the participation of Norway, Iceland, and Liechtenstein in the carbon border adjustment system, which aims to prevent carbon leakage by applying a carbon price to imports of certain goods. The financial contribution mechanism ensures that EEA EFTA states share the operational costs of CBAM across the whole EEA.
EU producers in carbon-intensive sectors (e.g., steel, cement, aluminium) will face a more level playing field as imports from EEA EFTA states become subject to the same carbon costs, reducing competitive disadvantage. EEA EFTA exporters to the EU will need to comply with CBAM reporting and certificate requirements, increasing administrative burden. EU customs authorities will have to manage CBAM implementation for imports from EEA EFTA states, requiring coordination with national authorities in those countries. EU taxpayers may benefit from the financial contributions of EEA EFTA states, which could offset some EU costs of operating CBAM.
The proposal now awaits adoption by the Council. The EEA Joint Committee is expected to formally incorporate the CBAM regulations into the EEA Agreement following the Council's decision.