US officials expanded access to clean vehicle subsidies in proposed guidelines released on Friday, allowing electric vehicles that use critical minerals collected and processed in Japan – and potentially the EU – to also benefit from incentives.

President Joe Biden's ambitious climate action plan, the Inflation Reduction Act (IRA), funnels some $370 billion (€340bn) into subsidies for America's energy transition, including tax cuts for US-made electric vehicles (EVs) and batteries.

Guidelines released on Friday by the Treasury Department spell out requirements that EV batteries have to meet for vehicles to qualify for a full $7,500 consumer tax credit.

While the IRA stipulates that a percentage of critical minerals in the battery must be sourced from America or countries it has free-trade pacts with – initially leaving Japan and the European Union in the cold – Friday's announcement signals room for manoeuvre.

The IRA stipulates that a percentage of critical minerals in the battery must be sourced from America or countries it has free-trade pacts with

"This term could include newly negotiated critical minerals agreements," said the Treasury Department in a statement. It added that 21 countries, Japan among them, are included.

The confirmation comes days after the United States and Japan unveiled a deal on critical minerals trade to reinforce supply chains in a sector dominated by China.

This opens doors for a similar pact with the EU, which could ease US tensions with the bloc.

European leaders have been concerned that EU-based energy and car companies will be shut out or move to the United States, and both sides are currently in talks for a targeted critical minerals deal.