Iran's Sustainability Gap: An Economic Analysis

Iran faces a widening sustainability gap as biocapacity stagnates while the ecological footprint expands. This study investigates how external debt, economic growth, natural resource rents, and renewable energy consumption affect the national load capacity factor—a composite index of biocapacity relative to ecological demand. Annual data for 1995–2023 were compiled from the World Bank and the Global Footprint Network. After verifying integration orders with Augmented Dickey–Fuller tests and selecting an optimal lag length, Johansen cointegration confirmed the presence of a long-run equilibrium relationship. Long-run coefficients were then estimated using Fully Modified Ordinary Least Squares (FMOLS). Model adequacy was evaluated with Hansen and Park cointegration tests, Jarque–Bera normality, and Ljung–Box and ARCH diagnostics. FMOLS estimates revealed positive elasticities for external debt (0.12) and renewable energy consumption (0.11), indicating that prudent external financing and clean-energy expansion enhance Iran’s load capacity factor. Conversely, economic growth (–0.96) and natural resource rents (–0.12) exhibited negative elasticities, reflecting the resource-curse effect and the economy’s current position on the upward phase of the Environmental Kuznets Curve. Diagnostic tests detected no autocorrelation, heteroskedasticity, or coefficient instability. managed sovereign borrowing and accelerated investment in renewables can improve Iran’s environmental carrying capacity, provided that growth strategies become less resource-intensive and rent dependence diminishes. Policy measures should include carbon-linked fiscal rules, green load-capacity bonds, a natural-resource-rent stabilization fund, and an inflation-indexed carbon tax whose proceeds support renewable feed-in tariffs.