Fuel Conservation Effect of Energy Subsidy Reform in Iran

Hossein Mirshojaeian Hosseini and Shinji Kaneko

No 3-1, Working Papers from Faculty of Economics,University of Tehran.Tehran,Iran

Abstract: To prevent further increases in energy consumption, the Iranian government commenced energy subsidy reform in 2010. This paper investigates the fuel conservation effects of the reform in Iran using a homothetic translog cost function that provides estimates of the own- and cross-price elasticities of fuel demands. The percentage reduction in fuel demands is estimated using the likely effect of the reform on fuel prices. The results reveal that the reform may not be as successful as assumed. Under optimistic assumptions, the reform may reduce energy consumption marginally, and under pessimistic assumptions, it may increase energy consumption because of inelastic fuel demands and substantial substitution between fuels.

Keywords: Energy subsidy reform; Energy conservation; Iran; Translog cost function (search for similar items in EconPapers)
JEL-codes: C32 Q38 Q43 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-01
New Economics Papers: this item is included in nep-ara and nep-ene
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Working Paper: Fuel Conservation Effect of Energy Subsidy Reform in Iran (2013)
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