Impacts of Energy Price Increase and Cash Subsidy Payments on Energy Demand

Energy demand is mainly a function of own price, price of substitute energies, the activity level of sectors, cost of materials and labor and capital, cost-share of energy, elasticity of substitution parameters and households income. The main purpose of this paper is to measure the changes in energy demand after energy price increase and cash subsidy payment to households. We apply a Computable General Equilibrium (CGE) model of Iran as a small open economy. The model is specialized in modeling energy market in Iran. We consider 7 energy goods; the discriminatory energy prices are considered between sectors, and energy markets are modeled to show how government controls the prices. The model is calibrated based on Energy Micro Consistent Matrix (EMCM) of Ministry of Energy. We found that chemical Industry and Transportation Services face the highest reduction in sectoral energy demand. In the counterfactual scenario, the relative price of electricity compared to other energies declines. Therefore electricity demand would increase in the long run when compared to short-run demand level. But as expected, the gas-oil and fuel demand would decrease in the long run

Impact of Energy Price Reform on Environmental Emissions; A Computable General Equilibrium Approach

An increase in energy prices will decrease fossil fuel consumption; on the other hand, the cost-push will encourage technology improvement for firms and households. These changes will affect the emission level. This paper studies the changes in yearly pollutant emissions after an energy price reform in Iran. We apply a computable general equilibrium model which consists of 7 energy goods (Electricity, natural gas, liquid gas, gasoline, kerosene, fuel, gas-oil) and also 7 pollutants (CO, CO2, SO2, SO3, CH, SPM, NOx). The model is calibrated based on a Micro Consistent Matrix of 2001 from the Ministry of Energy. We also assume different scenarios of energy layer elasticity which describe different technology changes in our sensitivity analysis. The findings suggest that by an increase in energy prices, the emission of most pollutants would decrease except for CO and CH. For these two, depending on the technology changes after the policy, their emission may decline or not. The decline in CO2 emission will be between 9 and 16 percent

Impact of Energy Price Reform on Environmental Emissions; A Computable General Equilibrium Approach

An increase in energy prices will decrease fossil fuel consumption; on the other hand, the cost-push will encourage technology improvement for firms and households. These changes will affect the emission level. This paper studies the changes in yearly pollutant emissions after an energy price reform in Iran. We apply a computable general equilibrium model which consists of 7 energy goods (Electricity, natural gas, liquid gas, gasoline, kerosene, fuel, gas-oil) and also 7 pollutants (CO, CO2, SO2, SO3, CH, SPM, NOx). The model is calibrated based on a Micro Consistent Matrix of 2001 from the Ministry of Energy. We also assume different scenarios of energy layer elasticity which describe different technology changes in our sensitivity analysis. The findings suggest that by an increase in energy prices, the emission of most pollutants would decrease except for CO and CH. For these two, depending on the technology changes after the policy, their emission may decline or not. The decline in CO2 emission will be between 9 and 16 percent

Environmental Impacts of Phasing out Energy Subsidies

Here, we investigate the environmental impacts of removing these subsidies in terms of emission of air pollutants. The paper employs a multi-pollutant, multi-fuel and multi-sector Computable General Equilibrium (CGE) model calibrated using 2001 Energy Micro Consistent Matrix (EMCM) of Iranian Ministry of Energy. We consider the possibility of pollutant substitution, which may change the pollutants mix and cause new environmental problems. Our findings suggest that pollutant substitution may happen if a policy causes extreme changes in relative energy prices. The magnitude of this substitution depends on energy substitution elasticities as well as sectoral activity level changes, energy share parameters, and emission factors. For the Iran case, we found that CO and CH emissions would increase after rising in energy prices

Environmental Impacts of Phasing out Energy Subsidies

Here, we investigate the environmental impacts of removing these subsidies in terms of emission of air pollutants. The paper employs a multi-pollutant, multi-fuel and multi-sector Computable General Equilibrium (CGE) model calibrated using 2001 Energy Micro Consistent Matrix (EMCM) of Iranian Ministry of Energy. We consider the possibility of pollutant substitution, which may change the pollutants mix and cause new environmental problems. Our findings suggest that pollutant substitution may happen if a policy causes extreme changes in relative energy prices. The magnitude of this substitution depends on energy substitution elasticities as well as sectoral activity level changes, energy share parameters, and emission factors. For the Iran case, we found that CO and CH emissions would increase after rising in energy prices

Impacts of Energy Price Increase and Cash Subsidy Payments on Energy Demand

Energy demand is mainly a function of own price, price of substitute energies, the activity level of sectors, cost of materials and labor and capital, cost-share of energy, elasticity of substitution parameters and households income. The main purpose of this paper is to measure the changes in energy demand after energy price increase and cash subsidy payment to households. We apply a Computable General Equilibrium (CGE) model of Iran as a small open economy. The model is specialized in modeling energy market in Iran. We consider 7 energy goods; the discriminatory energy prices are considered between sectors, and energy markets are modeled to show how government controls the prices. The model is calibrated based on Energy Micro Consistent Matrix (EMCM) of Ministry of Energy. We found that chemical Industry and Transportation Services face the highest reduction in sectoral energy demand. In the counterfactual scenario, the relative price of electricity compared to other energies declines. Therefore electricity demand would increase in the long run when compared to short-run demand level. But as expected, the gas-oil and fuel demand would decrease in the long run

Modeling Dutch Disease in the Economy of Iran: A Computable General Equilibrium Approach

In this paper, we will study the impacts of a counterfactual scenario of an increase in oil revenues on the price levels, activity levels, imports and exports in Iran. Our focus is on non-traded sectors, household welfare, and expenditure indices in the framework of a Computable General Equilibrium (CGE) model. The model is calibrated based on the 2001 Micro Consistent Matrix assuming Iran as a small open economy. The model consists of 11 production sectors, urban households, rural households, government, capital formation, exports, and imports. We concentrate on non-traded products especially rental services, public services, and construction sectors. Since part of the outputs of the construction sector relates to the capital value of buildings, we divided the demand for the construction sector into consumption and investment (seeking capital gain) purposes. In this study, we simulate the impact of a 30% increase in annual oil revenues. Based on the results, this shock leads to an increase in activity levels in the nontraded sectors and a decline in the traded sectors activity levels. Services and manufacturing show the highest increases in import levels at respectively 24% and 22%. Except for the oil and gas sector, all productive sectors experience declining exports. Public services, water, and construction sectors register the highest price increases. Results are robust to production elasticity of substitution choice, while they are sensitive to the elasticity of substitution between imports and domestic output

An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix

This paper identifies two types of implicit and explicit energy subsidies in Iran. Using a computable general equilibrium model, we analyze the impacts of reducing implicit and explicit energy subsidies. The model is based on a Modified Micro Consistent Matrix of MOE (the Ministry of Energy) which includes implicit subsidies. The model consists of 36 commodity groups and 18 economic activities. Our findings suggest that overall economic activity and consumer welfare will be reduced following the reduction of energy subsidies. Energy exports would increase and nonenergy exports decline. Economic activity will decline across all sectors except for upstream energy activities. Domestic energy demand by households and producers would decline as well

An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix

This paper identifies two types of implicit and explicit energy subsidies in Iran. Using a computable general equilibrium model, we analyze the impacts of reducing implicit and explicit energy subsidies. The model is based on a Modified Micro Consistent Matrix of MOE (the Ministry of Energy) which includes implicit subsidies. The model consists of 36 commodity groups and 18 economic activities. Our findings suggest that overall economic activity and consumer welfare will be reduced following the reduction of energy subsidies. Energy exports would increase and nonenergy exports decline. Economic activity will decline across all sectors except for upstream energy activities. Domestic energy demand by households and producers would decline as well

An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix

This paper identifies two types of implicit and explicit energy subsidies in Iran. Using a computable general equilibrium model, we analyze the impacts of reducing implicit and explicit energy subsidies. The model is based on a Modified Micro Consistent Matrix of MOE (the Ministry of Energy) which includes implicit subsidies. The model consists of 36 commodity groups and 18 economic activities. Our findings suggest that overall economic activity and consumer welfare will be reduced following the reduction of energy subsidies. Energy exports would increase and nonenergy exports decline. Economic activity will decline across all sectors except for upstream energy activities. Domestic energy demand by households and producers would decline as well