BERLIN, Jan 11 (Reuters) - German energy firm RWE urged protesters on Wednesday to end a sit-in protest against the expansion of an opencast lignite mine, a demonstration that has highlighted tensions over Germany's climate policy during an energy crisis.

The demonstrators, many wearing masks or balaclavas, have been protesting against the Garzweiler mine in the abandoned village of Luetzerath in the western state of North Rhine-Westphalia.

The protest follows a regional court decision on Monday that upheld an earlier ruling to vacate the village whose land and houses now belong to RWE.

The protesters have formed human chains, staged sit-in protests and occupied deserted buildings in Luetzerath that will be razed to make way for the mine's expansion. Some dug themselves into holes in the ground while others hung suspended from wooden tripods.

"RWE is appealing to the squatters to observe the rule of law and to end the illegal occupation of buildings, plants and sites belonging to RWE peacefully," the company said in a statement.

"Nobody should put their own health and life at risk by participating in illegal activity," it said.

Police on Tuesday began dismantling barricades and dragged away activists at the demonstration. RWE expects to start demolishing the former settlement of Luetzerath on Wednesday, it said.

The protests highlight growing tensions over Berlin's climate policy, which environmentalists say took a back seat during the energy crisis that hit Europe last year after Russia's invasion of Ukraine, forcing a return to dirtier fuels. (Writing by Paul Carrel; Editing by Tom Hogue)