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A dynamic 3E-DSGE analysis of renewable energy promotion policies in Iran

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  • Sayadi, Mohammad
  • Salehnia, Narges
  • Ariafar, Mohammad Reza

Abstract

This study develops an integrated 3E (energy–environment–economy) Dynamic Stochastic General Equilibrium (DSGE) model to evaluate how renewable-energy policies influence macroeconomic stability, environmental sustainability, and fiscal performance in a resource-rich developing economy. The model is calibrated to Iran's structural features—capital scarcity, fossil-fuel dependence, investment inefficiency, and fiscal vulnerability—and validated through Bayesian estimation and variance decomposition. Five policy scenarios are examined: (i) renewable productivity shocks, (ii) carbon taxation, (iii) energy-mix adjustment, (iv) low-carbon technology adoption, and (v) energy-efficiency improvement with rebound effects. Results indicate that renewable productivity enhancement delivers the most balanced outcomes, promoting growth while reducing fossil dependence. Carbon taxation effectively cuts emissions but causes short-run output losses, whereas energy-mix adjustment without fiscal support generates adverse macroeconomic effects. Low-carbon technology adoption ensures sustained long-term gains, while non-renewable energy efficiency improvements reveal rebound mechanisms that offset part of emission reductions. By integrating fiscal feedbacks, Bayesian-based validation, and behavioral rebound dynamics, the study provides novel insights into the trade-offs shaping energy-transition policy in oil-dependent developing economies.

Suggested Citation

  • Sayadi, Mohammad & Salehnia, Narges & Ariafar, Mohammad Reza, 2026. "A dynamic 3E-DSGE analysis of renewable energy promotion policies in Iran," Renewable Energy, Elsevier, vol. 258(C).
    • Handle: RePEc:eee:renene:v:258:y:2026:i:c:s0960148125024887
    DOI: 10.1016/j.renene.2025.124824
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    Keywords

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    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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