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Ex-post analysis of energy subsidy removal through integrated energy systems modelling

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  • Aryanpur, V.
  • Ghahremani, M.
  • Mamipour, S.
  • Fattahi, M.
  • Ó Gallachóir, B.
  • Bazilian, M.D.
  • Glynn, J.

Abstract

Energy subsidies can incentivise the overconsumption of energy resources and contribute to other economic or social distortions. In this paper, an ex-post analysis is presented that explores the extent to which electricity subsidy reform could have reduced Iran's energy demand during the period 1984–2017. It also quantifies the techno-economic and environmental benefits that could have been achieved through such reforms. A time-varying econometric model is linked to an energy systems optimisation model. The former estimates electricity demand under different subsidy removal scenarios, and the latter identifies the cost-optimal generation mix to meet the demand. The results of cost-optimal transition pathways under subsidy removal scenarios are compared with the real-world energy system development during the study horizon. The comparison reveals that the subsidy reform could have reduced the total cumulative electricity consumption by 22%. Renewable share in power generation could have increased from 5% to 15%. Moreover, the reform combined with a cost-optimal generation pathway would have saved $69 billion and avoided 944 million tons of CO2 emissions. The analysis also shows that every five-year delay in subsidy removal causes about 100 million tons of additional CO2 emissions. Finally, the paper presents lessons learnt for future energy modelling.

Suggested Citation

  • Aryanpur, V. & Ghahremani, M. & Mamipour, S. & Fattahi, M. & Ó Gallachóir, B. & Bazilian, M.D. & Glynn, J., 2022. "Ex-post analysis of energy subsidy removal through integrated energy systems modelling," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:rensus:v:158:y:2022:i:c:s1364032122000454
    DOI: 10.1016/j.rser.2022.112116
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