At the heart of the dispute are the domestic content requirements for projects installed under the Fit program, which offer above-market guaranteed prices to renewable energy producers.
In order to qualify, projects must meet a minimum percentage of their project costs using local goods and labour. The made-in-Ontario requirement starts at 25% and increases to 50% by 2012 for wind projects. In the case of larger solar projects, the current 50% minimum jumps to 60% next year.
In letters to the WTO, both the US and the EU argue they have a significant interest in the talks, which Japan launched September 13.
The European Union's submission to the WTO said: "The renewable energy generation sector is of key interest for the EU importers, exporters and investors.
"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."
It its letter, the US said: "[The US] is a major innovator of renewable energy and related technologies and is a primary source of Canadian imports of products used in the production of renewable energy."
In its original complaint, Japan argued that the provision violates longstanding rules of the Geneva-based WTO prohibiting subsidies that are contingent on the use of domestic over imported goods.
It requested consultations with Canada on the issue, the first step in a formal challenge. If consultations fail, the complaint goes before a panel for a ruling.
Ontario Energy Minister Brad Duguid has said he is confident the legislation is consistent with the province's trade obligations.
