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Fuel Conservation Effect of Energy Subsidy Reform in Iran

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  • Hossein Mirshojaeian Hosseini

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Shinji Kaneko

    (Graduate School for International Development and Cooperation, Hiroshima University)

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.

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File URL: http://ir.lib.hiroshima-u.ac.jp/metadb/up/ZZT00001/IDEC-DP2_03-1.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Hiroshima University, Graduate School for International Development and Cooperation (IDEC) in its series IDEC DP2 Series with number 3-1.

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Length: 24 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:hir:idecdp:3-1

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Web page: http://www.hiroshima-u.ac.jp/en/idec/
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Keywords: Energy subsidy reform; Energy conservation; Iran; Translog cost function;

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