IDEAS home Printed from https://ideas.repec.org/p/eut/wpaper/dp3-1.html
   My bibliography  Save this paper

Fuel Conservation Effect of Energy Subsidy Reform in Iran

Author

Listed:
  • 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.

Suggested Citation

  • Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2013. "Fuel Conservation Effect of Energy Subsidy Reform in Iran," Working Papers 3-1, Faculty of Economics,University of Tehran.Tehran,Iran.
  • Handle: RePEc:eut:wpaper:dp3-1
    as

    Download full text from publisher

    File URL: http://ir.lib.hiroshima-u.ac.jp/metadb/up/ZZT00001/IDEC-DP2_03-1.pdf
    Download Restriction: no

    File URL: ftp://80.66.179.253/eut/wpaper/wp01.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Urga, Giovanni & Walters, Chris, 2003. "Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand," Energy Economics, Elsevier, vol. 25(1), pages 1-21, January.
    2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    3. Vega-Cervera, J.A. & Medina, J., 2000. "Energy as a productive input: The underlying technology for Portugal and Spain," Energy, Elsevier, vol. 25(8), pages 757-775.
    4. Welsch, Heinz & Ochsen, Carsten, 2005. "The determinants of aggregate energy use in West Germany: factor substitution, technological change, and trade," Energy Economics, Elsevier, vol. 27(1), pages 93-111, January.
    5. Patricia Renou-Maissant, 1999. "Interfuel Competition in the Industrial Sector of Seven OECD Countries," Post-Print hal-02562575, HAL.
    6. Debertin, David L. & Pagoulatos, Angelos & Aoun, Abdessalem, 1990. "Impacts of technological change on factor substitution between energy and other inputs within US agriculture, 1950-79," Energy Economics, Elsevier, vol. 12(1), pages 2-10, January.
    7. Al-Mutairi, Naief & Burney, Nadeem A., 2002. "Factor substitution, and economies of scale and utilisation in Kuwait's crude oil industry," Energy Economics, Elsevier, vol. 24(4), pages 337-354, July.
    8. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014, December.
    9. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "Substitution possibilities and determinants of energy intensity for China," Energy Policy, Elsevier, vol. 37(5), pages 1793-1804, May.
    10. Magnus, Jan R, 1979. "Substitution between Energy and Non-Energy Inputs in the Netherlands, 1950-1976," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 465-484, June.
    11. Renou-Maissant, Patricia, 1999. "Interfuel competition in the industrial sector of seven OECD countries," Energy Policy, Elsevier, vol. 27(2), pages 99-110, February.
    12. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-268, August.
    13. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-179, May.
    14. Bölük, Gülden & Koç, A. Ali, 2010. "Electricity demand of manufacturing sector in Turkey: A translog cost approach," Energy Economics, Elsevier, vol. 32(3), pages 609-615, May.
    15. Perkins, F. C., 1994. "A dynamic analysis of Japanese energy policies : Their impact on fuel switching and conservation," Energy Policy, Elsevier, vol. 22(7), pages 595-607, July.
    16. Soderholm, Patrik, 2001. "Fossil fuel flexibility in west European power generation and the impact of system load factors," Energy Economics, Elsevier, vol. 23(1), pages 77-97, January.
    17. Theo Stratopoulos & Evangelos Charos & Kelly Chaston, 2000. "A translog estimation of the average cost function of the steel industry with financial accounting data," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(2), pages 271-286, May.
    18. Roy, Joyashree & Sanstad, Alan H. & Sathaye, Jayant A. & Khaddaria, Raman, 2006. "Substitution and price elasticity estimates using inter-country pooled data in a translog cost model," Energy Economics, Elsevier, vol. 28(5-6), pages 706-719, November.
    19. Humphrey, David Burras & Moroney, John R, 1975. "Substitution among Capital, Labor, and Natural Resource Products in American Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 57-82, February.
    20. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2002. "Allocative inefficiency and the capital-energy controversy," Energy Economics, Elsevier, vol. 24(4), pages 305-318, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2013. "Fuel Conservation Effect of Energy Subsidy Reform in Iran," Working Papers 3-1, Faculty of Economics,University of Tehran.Tehran,Iran.
    2. Mirshojaeian Hosseini , Hossein & Majed , Vahid & Kaneko , Shinji, 2015. "The Effects of Energy Subsidy Reform on Fuel Demand in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(2), pages 23-47, January.
    3. Ma, Hengyun & Oxley, Les & Gibson, John & Kim, Bonggeun, 2008. "China's energy economy: Technical change, factor demand and interfactor/interfuel substitution," Energy Economics, Elsevier, vol. 30(5), pages 2167-2183, September.
    4. He, Yongda & Lin, Boqiang, 2019. "Heterogeneity and asymmetric effects in energy resources allocation of the manufacturing sectors in China," Energy, Elsevier, vol. 170(C), pages 1019-1035.
    5. Dong Hee Suh, 2015. "Declining Energy Intensity in the U.S. Agricultural Sector: Implications for Factor Substitution and Technological Change," Sustainability, MDPI, vol. 7(10), pages 1-14, September.
    6. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "Substitution possibilities and determinants of energy intensity for China," Energy Policy, Elsevier, vol. 37(5), pages 1793-1804, May.
    7. Bello, Mufutau Opeyemi & Solarin, Sakiru Adebola & Yen, Yuen Yee, 2018. "Hydropower and potential for interfuel substitution: The case of electricity sector in Malaysia," Energy, Elsevier, vol. 151(C), pages 966-983.
    8. Khalid, Waqar & Özdeşer, Hüseyin & Jalil, Abdul, 2021. "An empirical analysis of inter-factor and inter-fuel substitution in the energy sector of Pakistan," Renewable Energy, Elsevier, vol. 177(C), pages 953-966.
    9. Wesseh, Presley K. & Lin, Boqiang & Appiah, Michael Owusu, 2013. "Delving into Liberia's energy economy: Technical change, inter-factor and inter-fuel substitution," Renewable and Sustainable Energy Reviews, Elsevier, vol. 24(C), pages 122-130.
    10. Suh, Dong Hee, 2015. "Identifying Factor Substitution and Energy Intensity in the U.S. Agricultural Sector," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205264, Agricultural and Applied Economics Association.
    11. Koetse, Mark J. & de Groot, Henri L.F. & Florax, Raymond J.G.M., 2008. "Capital-energy substitution and shifts in factor demand: A meta-analysis," Energy Economics, Elsevier, vol. 30(5), pages 2236-2251, September.
    12. Manish Gupta & Ramprasad Sengupta, 2013. "Energy Savings Potential and Policy for Energy Conservation in Selected Indian Manufacturing Industries," Review of Market Integration, India Development Foundation, vol. 5(3), pages 363-388, December.
    13. Andersen, Trude Berg & Nilsen, Odd Bjarte & Tveteras, Ragnar, 2011. "How is demand for natural gas determined across European industrial sectors?," Energy Policy, Elsevier, vol. 39(9), pages 5499-5508, September.
    14. Bardazzi, Rossella & Oropallo, Filippo & Pazienza, Maria Grazia, 2015. "Do manufacturing firms react to energy prices? Evidence from Italy," Energy Economics, Elsevier, vol. 49(C), pages 168-181.
    15. Wang, Ailun & Lin, Boqiang, 2020. "Structural optimization and carbon taxation in China's commercial sector," Energy Policy, Elsevier, vol. 140(C).
    16. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2009. "On interfuel substitution : some international evidence," Policy Research Working Paper Series 5026, The World Bank.
    17. David I. Stern, 2012. "Interfuel Substitution: A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 307-331, April.
    18. Khayyat, Nabaz T. & Heshmati, Almas, 2014. "Production Risk, Energy Use Efficiency and Productivity of Korean Industries," IZA Discussion Papers 8081, Institute of Labor Economics (IZA).
    19. Zhu, Shu & Xu, Xin & Ren, Xiaojing & Sun, Tianhua & Oxley, Les & Rae, Allan & Ma, Hengyun, 2016. "Modeling technological bias and factor input behavior in China's wheat production sector," Economic Modelling, Elsevier, vol. 53(C), pages 245-253.
    20. Henriksson, Eva & Söderholm, Patrik & Wårell, Linda, 2012. "Industrial electricity demand and energy efficiency policy: The role of price changes and private R&D in the Swedish pulp and paper industry," Energy Policy, Elsevier, vol. 47(C), pages 437-446.

    More about this item

    Keywords

    Energy subsidy reform; Energy conservation; Iran; Translog cost function;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eut:wpaper:dp3-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: [z.rahimalipour] (email available below). General contact details of provider: https://edirc.repec.org/data/fecutir.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.