Some of the world's most powerful countries have joined the battle over Ontario's green energy plan, threatening the cornerstone of Premier Dalton McGuinty's renewable power strategy.
The United States and the European Union emerged on Thursday as latest countries to say they have key commercial interests at stake and want to join the consultations on a complaint by Japan to the World Trade Organization.
"This is a wake-up call" for the Ontario government, said David Butters, president of the Association of Power Producers of Ontario. He added that it is clear some major international suppliers in the renewable energy sector are unhappy with the Ontario approach.
Green energy is an increasingly important part of the Canadian economy, with both Ontario and British Columbia racing to make themselves world centres of environmentally friendly power generation.
The United States and the EU filed notices with the Geneva-based trade body this week. The Japanese government launched its action two weeks ago, saying Ontario's Green Energy Act and its local procurement requirements are a "prohibited subsidy" and violate international trade agreements.
Under WTO rules, countries must enter into consultations to determine whether trade disputes can be resolved before they can begin quasi-legal dispute settlement procedures that can result in trade sanctions.
The Green Energy Act aims to reduce greenhouse gas emissions in the electricity sector and create thousands "green energy" jobs in emerging technologies.
Mr. McGuinty's government is under fire over rising electricity costs, with critics partly blaming the feed-in-tariff that ensures wind, solar and small-scale hydro developers receive premium prices for their power.
Under the Ontario plan, developers who qualify for feed-in-tariff contracts must buy from local suppliers up to half of the goods and services needed. The McGuinty government says this will create manufacturing jobs.
"Our position is that Ontario's Green Energy Act is consistent with Canada's international trade obligations under the WTO," Energy Minister Brad Duguid said in an e-mail response to The Globe.
International Trade Minister Peter Van Loan has backed that position.
The McGuinty government is encouraging renewable energy development as part of its commitment to phase out coal-fired generation by the end of 2014, Mr. Duguid said. The minister is due to announce on Friday that the province has permanently shuttered four coal fired-units.
British Columbia Premier Gordon Campbell has matched Mr. McGuinty's enthusiastic push for green power, but has not run into trade complaints.
Japan, the United States and European countries also have clean power strategies, and see Ontario's local-content rules as a threat to their export potential.
"The renewable energy generation sector is of key interest for the EU importers, exporters and investors," said the European Union submissions to the WTO. "Therefore the EU has a substantial trade interest in the present dispute as well as a systemic interest in the correct implementation" of international trade agreements.
Ontario signed a deal last year with South Korean giant Samsung Group, which agreed to build four manufacturing plants in the province in return for premium energy prices, access to the transmission system and $437-million in incentives.
But many other equipment makers are unhappy with the Ontario approach, saying a balkanized manufacturing system will drive up the cost of constructing renewable power stations.
With a report from Karen Howlett at Queen's Park