Energy Price Reform and Energy Efficiency in Iran

IAEE Energy Forum, 2013

10 Pages Posted: 5 Oct 2013

See all articles by Saeed Moshiri

Saeed Moshiri

Saint Thomas More College University of Saskatcehwan

Date Written: October 3, 2013

Abstract

Iran is an energy-rich country possessing 11 percent of global oil reserves and 15.3 percent of global natural gas reserves. Ranked 2nd among OPEC and with a potential for natural gas exports to Europe and Asia, Iran also plays a significant role in the world energy market and the global economy. However, Iran’s rapidly growing own energy consumption (about 6 percent per year for the past 30 years) has raised concerns about the country’s ability to continue to export oil in the next decade. The main driving forces behind the rising trend of energy consumption are economic growth (5 percent for the past 40 years) and population growth (about 2 percent), and heavily subsidized energy markets (12 percent of the GDP) (Iran Energy Balance, 2010; Central Bank of Iran Economic Indicators, 2011). The latter, along with other factors such as poor management, lack of investment, and structure of the economy with a lion’s share of economic activities controlled by government, have led to an inefficient use of energy. The energy intensity index in Iran is one of the highest in the world (twice as much as the world average) and has been increasing on average by about 3.4 percent per year over the past 40 years (Iran Energy Balance, 2010; EIA, 2011). The substantial subsidizing of energy prices over the years has also led to low productivity in the energy-intensive industries, deterioration of environment in urban areas, and a huge burden on the government budget leading to macroeconomic disturbances.

To address the increasing economic and social problems associated with high energy subsidies, Iran implemented an aggressive and wide-ranging energy price reform through which energy subsidies were to be removed in 2010. The main objectives of the reform plan were twofold: to bring the government budget in control and to cut energy consumption. In this article, I review the energy market and the energy price reform in Iran with a focus on energy efficiency.

Keywords: Energy Price Reform, Energy Efficiency, Iran

JEL Classification: D12, Q41, Q48

Suggested Citation

Moshiri, Saeed, Energy Price Reform and Energy Efficiency in Iran (October 3, 2013). IAEE Energy Forum, 2013. Available at SSRN: https://ssrn.com/abstract=2335755

Saeed Moshiri (Contact Author)

Saint Thomas More College University of Saskatcehwan ( email )

1437 College Dr
Saskatoon, Saskatchewan S7N 0W6
Canada

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