“(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations for 1 or more of the following purposes:
“(2) Before recommending the making of a regulation under subsection (1)(b) that prescribes the allocative baseline for an eligible industrial activity (but not before recommending the making of any other regulation under this section), the Minister must have regard to the following paragraphs (a) and (b) or paragraph (c) or paragraphs (c) and (d):
“(a) the average emissions from the direct use of natural gas, geothermal fluid, used or waste oil, coal, and (if relevant) any emissions for which the person carrying out the activity is liable under Part 4 of Schedule 3, per unit of production across all entities conducting the eligible industrial activity in New Zealand, for which data has been provided, during the 2006/07, 2007/08, and 2008/09 financial years:
“(b) the average electricity use per unit of production across all entities conducting the specified activity in the 2006/07, 2007/08, and 2008/09 financial years, and an electricity allocation factor set to represent the cost increases from the use of electricity (with enough flexibility to enable protection from pass through of costs provided by large electricity contracts to be considered):
“(3) Subject to subsection (6), the Minister may not recommend that a regulation be made under subsection (1)(a) prescribing an activity as an eligible industrial activity unless the Minister is satisfied that the activity—
“(4) For the purposes of this section, an eligible industrial activity—
“(a) is moderately emissions-intensive if the weighted average emissions-intensity from those carrying out the activity in the years for which data has been provided under section 161B were equal to or greater than 800 whole tonnes of emissions per $1 million of revenue from the activity, but less than 1600 whole tonnes of emissions per $1 million of revenue:
“(c) is, subject to subsection (6), trade-exposed unless, at the time the Minister considers the eligibility of the relevant activity, in the Minister's opinion—
“(5) Despite anything in this section, the generation of electricity is not to be treated as trade-exposed.
“(6) The Minister may recommend that regulations be made under subsection (1)(a) and (b)(iii) prescribing an activity as an eligible activity that is moderately emissions-intensive or highly emissions-intensive if emissions from the activity would enable, or is likely to enable, those carrying out the same activity in the Commonwealth of Australia to receive a free allocation of units in that jurisdiction.
“(7) In determining whether to recommend that an activity be prescribed as an eligible industrial activity, the Minister must have regard to the following:
“(b) principle 2: activities should not be defined by reference to the technology employed, the fuel used, the age of the plant, or the quality and types of feedstock used:
“(c) principle 3: despite principle 2, activities may be defined by reference to their emissions or electricity use, provided that those references are integral and essential to the defined physical and chemical transformation that transforms the inputs into outputs:
“(f) principle 6: definitions of activities should reflect activity definitions in the Commonwealth of Australia unless the relevant New Zealand activity's inputs, outputs, physical or chemical transformation is materially different:
“(8) To avoid doubt, the Minister may, in determining whether an activity meets a threshold in subsections (4)(a) and (b), take into account the emissions intensity from electricity use used for the purposes of determining the eligibility of the activity for an allocation of units in the Commonwealth of Australia.
“(9) A regulation that amends the regulations made under subsection (1) and has the effect of removing or substantially redefining an eligible activity comes into force on the day 5 years after the date of their notification in the Gazette or any later date that may be set by the regulations.