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GENEVA (Reuters) - Japan asked the World Trade Organization on Wednesday to form a legal panel to decide whether Canadian provincial backing for solar and wind energy projects gives an unfair advantage to domestic equipment makers.
Japan has given up direct attempts to resolve a spat over an Ontario scheme that guarantees prices for renewable energy as long as it is generated with Canadian-made equipment, Japan's ambassador to the WTO said in a letter to the chairman of the WTO's disputes division.
"Consultations failed to resolve the dispute. As a result, Japan respectfully requests that a panel be established to examine this matter," Ambassador Yoichi Otabe wrote.
The dispute stokes a larger debate over plans by countries including Canada, the United States and China among others to reserve public works as well as energy and environmental projects worth billions of dollars for local firms.
"Japan is seriously concerned about a possible proliferation of such protectionist measures all over the world," Tokyo said in a statement.
Japan says that an environmental scheme operated by the Ontario provincial government violates Canada's obligations as a WTO member. Ontario is the most populous of Canada's 10 provinces.
In Ottawa, the federal government said it would "always vigorously defend Canada's interests before the WTO dispute settlement panel" while noting that the environmental plan was the responsibility of Ontario.
In May 2009, Ontario set a minimum feed-in tariff for electricity generated from renewable sources -- part of Canada's battle against climate change -- but reserved this for generators partially or completely built in Canada.
Japan says the local-content clause is illegal and cites Ontario's decision in January 2011 to further raise the local content requirement.
WTO members will discuss the opening of legal proceedings on June 17, with Canada likely to ask for a delay while it studies Japan's complaint.
Since Ontario launched its feed-in tariff program, a number of domestic and foreign companies have announced plans to set up operations in the province.
The biggest is a project led by South Korea's Samsung C&T, which signed a C$7 billion ($7.14 billion) deal early last year to generate wind and solar power and build four plants to manufacture components. It is expected to create 16,000 jobs.
Additional reporting by David Ljunggren in Ottawa; editing by Rob Wilson