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Canadian Hydro wind turbines near Shelburne, Ontario.

Tibor Kolley/The Globe and Mail

The Canadian government has filed an appeal of a World Trade Organization ruling made in December that could derail parts of Ontario's green energy program.

The appeal notice, filed on Tuesday, asks that the WTO overturn its decision that Ontario's program breaks international trade rules because it forces companies selling premium-priced clean energy into the province's electrical grid to buy a proportion of their equipment and services in Ontario.

Japan first complained to the WTO about those provisions in September 2010, and the European Union joined the case in August 2011. The WTO released its decision on Dec. 19, ruling against Canada on part of the complaint.

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The decision said Ontario breached its obligations under the General Agreement on Tariffs and Trade, because the local-content requirements essentially treat imported equipment and components differently than domestic products. But it did not uphold part of the Japanese and European complaint that suggested the local content rules amount to an illegal subsidy.

"We recommend that Canada bring its measures into conformity with its obligations under the ... GATT," the ruling said.

While the complaint involved Ontario's green energy program, it was actually filed against Canada, because the WTO deals with nations rather than regional governments. The Ontario government asked Ottawa to file an appeal.

Industry participants said the WTO's ruling could have a chilling effect on Ontario's green energy development, which has already been hit by other problems such as permitting delays, a shortage of investment capital, and local complaints about the health and visual impact of wind turbines.

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