Japan has filed a complaint to the World Trade Organisation that the Ontario feed-in-tariff (FIT) violates WTO rules and is protectionist.
As many foreign renewable energy developers are aware, the Ontario FIT requires the use of Ontario-made products in manufacturing power-generating facilities.
"Japan considers that this requirement for the use of locally made products violates" the WTO's rules that ban discrimination against products made overseas, Japan's foreign ministry said.
The FIT requires that in order to receive payments under the FIT, companies must have a minimum percentage of their project costs come from Ontario goods and labour. The requirement currently starts at 25%, and increases to 50% by 2012 for wind projects. For larger solar PV projects, the minimum is 50%, which increases to 60% next year.
Japan has asked Canada to reconsider its decision. It will now undergo formal consultations under the WTO with the Canadian government.
Ottawa will defend Ontario and its green energy policy against a complaint from Japan that it violates Canada's trade obligations, International Trade Minister Peter Van Loan said Tuesday.
If the next round of negotiations fail, Japan will likely ask the WTO to set up a panel for dispute settlement, the Japanese foreign ministry said.
Japan has many companies in the solar energy space, including Sharp, Kyocera, Sanyo and Mitsubishi Electric, as well as major suppliers of components and wind systems.
Under the FIT, Ontario announced a $7-billion deal with Korean giant Samsung to build wind and solar farms, along with four plants to manufacture components for green energy projects.
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