International Journal of Environmental Research

, Volume 13, Issue 6, pp 943–950 | Cite as

The Inefficiency of Energy Pricing Policy: The Case of Iran

  • Ezatollah AbbasianEmail author
  • Ali Souri
Research paper


High-energy consumption leads to a serious threat to climate change and human health, while contributing to environmental pollution. Concerns about climate change, air quality, and water quality and availability have made Iranian people and government increasingly aware of the need to reconcile economic and environmental objectives. Government energy pricing policies have multiple and often conflicting objectives: economic efficiency, government revenues, maintenance or improvement of income distribution, promotion of particular sectors demand management and security of supply. Increasing energy efficiency is the quickest and least costly way of addressing energy security and the environmental as well as economic challenge. According to statistics, since 1988, the Iranian government has increased the price of energy by 23.2% annually to reduce the consumption of energy (Dargahi and Ghorbannejad in Iran Energy Econ 1(4):67–100, 2012). But in this period, the growth rate of energy intensity was about 1.6%. In Iranian economy, people know, in advance, to what extent the government would increase the energy price. People expect an increase in the price of all products due to the increase in energy price. In this paper, we study such a behavior which has led to inefficiency of the government policy. Consumer subsidies are quantified utilizing the price-gap approach that compares end-user prices and reference prices that would predominate in competitive markets where no subsidies are provided. An input–output analysis is undertaken to investigate impacts in the short term. We modify the conventional input–output price model to consider the effect of the increase in energy prices.


Environmental accounting Energy pricing Expectations Input–output analysis Iran 


  1. Akinyemi O, Alege PO, Ajayi OO (2018) Energy pricing policy and environmental quality in Nigeria: a dynamic computable general equilibrium approach. Int J Energy Econ Policy 7(1):268–276Google Scholar
  2. Alizadeh R, Majidpour M, Maknoon R, Salimi J (2015) Iranian energy and climate policies adaptation to the Kyoto protocol. Int J Environ Res 9(3):853–864Google Scholar
  3. Atalla TN, Gasim AA, Hunt LC (2018) Gasoline demand, pricing policy, and social welfare in Saudi Arabia: a quantitative analysis. Energy Policy 114:123–133CrossRefGoogle Scholar
  4. Central Bank of Iran, National Accounts of Iran, 2000–2010. Central Bank of Iran, Bureau of Economic, TehranGoogle Scholar
  5. Dargahi H, Biabany Khameneh K (2019) Energy intensity determinants in an energy-exporting developing economy: case of Iran. Energy 168(1):1031–1044CrossRefGoogle Scholar
  6. Dargahi H, Ghorbannejad M (2012) The impacts of energy prices reform and the compensation policies on macroeconomics variables: the case of Iran (2011–2015). Iran Energy Econ 1(4):67–100Google Scholar
  7. Hawdon D, Pearson P (1995) Input–output simulations of energy, environment, economy interactions in the UK. Energy Econ 17:73–86CrossRefGoogle Scholar
  8. Hawkins J, Ma C, Schilizzi S, Zhang F (2015) Promises and pitfalls in environmentally extended input–output analysis for China: a survey of the literature. Energy Econ 48:81–88CrossRefGoogle Scholar
  9. Hong JQ, Shen F Xue (2016) A multi-regional structural path analysis of the energy supply chain in China’s construction industry. Energy Policy 92:56–68CrossRefGoogle Scholar
  10. Kalantari K, Maknoon R, Karimi D (2018) Developing sustainable legal framework for the establishment of integrated water resources management in Iran. Int J Environ Res 12(2):223–231CrossRefGoogle Scholar
  11. Lenzen M (2011) Aggregation versus disaggregation in input–output analysis of the environment. Econ Syst Res 23(1):73–89CrossRefGoogle Scholar
  12. Liu W, Zhang X, Feng S (2019) Does renewable energy policy work? Evidence from a panel data analysis. Renew Energy 135:635–642CrossRefGoogle Scholar
  13. Mirzaei Khalilabadi HR, Chizari AH, Dahajipour Heidarabadi M (2014) Effects of increasing price of energy carriers on energy consumption in pistachio production: case study in Rafsanjan, Iran. J Agric Sci Technol 16:697–704Google Scholar
  14. Mossalanejad A (2011) The role of economic policy and environment in sustainable development. Int J Environ Res 5(2):395–402Google Scholar
  15. Nouri J, Hosseinzadeh Lotfi F, Borgheipour H, Atabi F, Sadeghzadeh SM, Moghaddas Z (2013) An analysis of the implementation of energy efficiency measures in the vegetable oil industry of Iran: a data envelopment analysis approach. J Clean Prod 52:84–93CrossRefGoogle Scholar
  16. Souri A (1999) The impact of increasing energy prices on inflation in Iran. Ministry of Energy of Iran, Bureau of Energy Planning, TehranGoogle Scholar
  17. World Bank (1999) Economic aspects of increasing energy prices to border-land prices in the Islamic Republic of Iran. World Bank Middle East and North Africa Department, Washington, DCGoogle Scholar
  18. Zhang Y, Nie R, Shi X, Qian X, Wang K (2019) Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector. Energy Policy 128(C):125–135CrossRefGoogle Scholar

Copyright information

© University of Tehran 2019

Authors and Affiliations

  1. 1.Department of Public Administration, Faculty of ManagementUniversity of TehranTehranIran
  2. 2.Faculty of EconomicsUniversity of TehranTehranIran

Personalised recommendations