If Ontario Power Generation doesn't cut greenhouse gas emissions from Nanticoke and its three other coal plants, it will be able to spend the resulting penalties on new nuclear or natural gas stations, or on major renewable energy projects, Baird said in an interview.
"It's a win for the environment and a win for Ontario taxpayers."
Relations between Ottawa and Queen's Park have been acrimonious, particularly with Conservative Finance Minster Jim Flaherty's attacks on the provincial Liberals' business tax rate. Baird's decision appears to avert a major dispute. "The public expects us to work together on issues like this," he said.
Baird told Ontario Environment Minister John Gerretsen the news in a private meeting.
While the policy might improve federal-provincial relations, it won't please environmentalists who want the coal plants shut quickly and, in most cases, oppose nuclear projects.
Under the latest update to the federal climate-change plan, published, OPG and other large polluters must reduce the intensity of their greenhouse gas emissions the amount per unit of production by 18 per cent by 2010, and 2 per cent annually after that.
If they do better than that, they'll get credits, which could be sold through a proposed carbon trading system. If they fail to meet their target, they can purchase credits or pay into a new technology fund.
The price in all cases would start at $15 per tonne of carbon and rise in steps to $65 by 2018.
The updated plan intended to cut Canada's greenhouse gas emissions to 20 per cent below 2006 levels by 2020 allows OPG, like any other electricity producer, to be judged on total emissions from its plants. If each facility were assessed separately, as Ottawa had indicated previously, OPG would have faced massive penalties for the coal-burning plants.
The change means OPG will get carbon credits if it cuts its company-wide emissions through conservation efforts or switching to cleaner fuels, even if the coal plants continue to spew greenhouse gases at current levels.
It is, however, more likely it won't meet its target: Since it is to shut all the coal plants by 2014 and has no plans for pollution controls or major upgrades their emissions are expected to remain constant.
In that case, instead of contributing to the technology fund, it will be allowed to devote the penalty cash to construction of nuclear or other electricity generating technology, "as long as it's a transformative change," Baird said.
These rules would apply even if the coal plants aren't closed by 2014, but any credits or payments must be reversed if they're not out of service by 2018, Baird said. The value will depend on the amount of emissions, but "it's at least hundreds of millions of dollars," he said.
The giant Nanticoke plant on Lake Erie spews 17.6 million tonnes of greenhouse gases each year. If it failed to meet its 2010 target, the penalty for that year alone, at the low $15 carbon price, would be about $50 million. Nuclear stations to replace the coal-fired plants are expected to cost about $40 billion.