Document Type : Research Paper

Authors

1 Associate Professor, Economics of Energy Department, Faculty of Economics, Kharazmi University, Tehran, Iran

2 Assistant Professor, Economics of Public Affairs Department, Faculty of Economics, Kharazmi University, Tehran, Iran

3 M.A. in Economics of Energy Department, Faculty of Economics, Kharazmi University, Tehran, Iran

Abstract

Energy subsidies encompass explicit subsidies and implicit subsidies (opportunity costs), both of which significantly influence economic agents' decision-making, as described in the theoretical literature. Iran faces several pressing issues, including escalating energy consumption, inadequate price signaling to address consumption patterns, increasing greenhouse gas emissions, and prevailing distributional challenges related to energy subsidies. Consequently, reforming energy carrier subsidies in Iran becomes an imperative task. However, numerous obstacles hinder the effective implementation of this policy, presenting substantial challenges. This study employs a comparative approach that incorporates expert opinions and utilizes the Fuzzy Analytical Hierarchy Process (FAHP) method with a holistic perspective to evaluate and rank the barriers to energy subsidy reform. The identified barriers are categorized into three groups based on specific criteria: 1) political and social barriers, 2) economic barriers, and 3) institutional and governance barriers. Subsequently, thirteen sub-criteria have been established, considering Iran's economic conditions. The research findings highlight the significance of economic barriers, accounting for 53% weight, followed by political and social barriers with 26%, and institutional and governance barriers with 21%. Notably, among the economic barriers, the high dependency of energy industries on the country's exports and the government's concerns about potential damage to foreign exchange revenues, particularly under sanctions, emerge as crucial factors. Regarding political and social barriers, the prevalent mindset of entitlement among citizens regarding energy subsidies proves noteworthy. Additionally, the lack of a cohesive and reliable database for implementing energy subsidy reform policies assumes utmost importance among institutional and governance barriers. Based on these results, it is imperative for the government to undertake measures encompassing formulation, implementation, and evaluation in all dimensions of energy subsidy reform

Keywords

Main Subjects

 
References
Abbasian, E., & Asadbeygi, Z. (2011). The relationship between targeting energy subsidies and social welfare through economic growth path. Quarterly Journal of Social Welfare, 12(4), 143-173. [In Persian]
Akimaya, M., & Dahl, C. (2017). Simulation of price controls for different grade of gasoline: The case of Indonesia. Energy Economics, 68,
373-382.
Amadeh, H., Ghafari, A., & Farajzadeh, Z. (2014). Analysis of Environmental and Welfare Effects of Energy Subsidy Refor Application of Computable General Equilibrium Model. Iranian Energy Economics, 4(13), 33-62. [In Persian]
Amoli, A., & Sadoughi Shahdani, M. (2012). Determining the optimum share of energy subsidies in economic subsectors using analytical hierarchy process (AHP) and fuzzy linear programming (FLP). Quarterly Journal of Economic Modeling Research, 4(11), 77-98. [In Persian]
Aragonés-Beltrán, P., Chaparro-González, F., Pastor-Ferrando, J-P., and Pla-Rubio, A. (2014). An AHP (Analytic Hierarchy Process)/ANP (Analytic Network Process)-Based Multi-Criteria Decision Approach for the Selection of Solar-Thermal Power Plant Investment Projects. Energy, Vol. 66, PP. 222-38.
Atansah, P., Khandan, M., Moss, T., Mukherjee, A., & Richmond, J. (2017). When do subsidy reforms stick? Lessons from Iran, Nigeria, and India. Center for Global Development. Retrieved from https://www. cgdev. Org/sites/default/files/when-do-subsidy-reformsstick-lessons-iran-nigeria-and-india. pdf.‏
Balali, H., mehrgan, N., & Bajelan, A. (2021). The impact of energy prices index on food prices index: Application of Auto-Regressive Distributed Lag Model. Agricultural Economics Research, 12(48), 171-188.
[In Persian]
Bonder, C. G. E., Graan, J.G. de. Lootsma, F.A., (1989). Multicretia decision analysis withfuzzy pairwise comparisons. Fuzzy Sets and Systems 0, 133-103.
Boughanmi, H., & Aamir Khan, M. (2019). Welfare and distributional effects of the energy subsidy reform in the Gulf Cooperation Council countries: the case of Sultanate of Oman. International Journal of Energy Economics and Policy, 9(1), 228-236.‏
Buckley, J. (1985). Ranking alternatives using fuzzy numbers. Fuzzy Sets and Systems ,17(1): 233-247.
Cheon, A., Urpelainen, J., & Lackner, M. (2013). Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices 2002-2009. Energy Policy, 56, 382-390.
Coady, D., Gillingham, R., Ossowski, R., Piotrowski, J. M., Tareq, S., & Tyson, J. (2010). Petroleum Product Subsidies: Costly, Inequitable, and On the Rise. IMF Staff Position Notes, 2010(005).
Dagdeviren, M., & Yuksel, I. (2008). Developing a fuzzy analytic hierarchy process (AHP) model for behavior-based safety management. Information Sciences, 178, 1717-1733.
De Mesquita, B. B., Morrow, J. D., Siverson, R. M., & Smith, A. (2002). Political institutions, policy choice and the survival of leaders. British Journal of Political Science, 32(4), 559-590.
Gholi, Z., & Vahdian, S. (2016). Energy subsidy reform - Lessons and concepts. Economic Journal, 3(4), 37-52. [In Persian]
Hafner, M., & Luciani, G. (2022). The Palgrave handbook of international energy economics (p. 770). Springer Nature.‏ ISBN : 978-3-030-86883-3.
Hartono, D., Komarulzaman, A., Irawan, T., & Nugroho, A. (2020). Phasing out energy subsidies to improve energy mix: A dead end. Energies, 13(9), 2281.
Hatamvand, Z., Shadabfar, E., Emrai, A., & Shokri, M. (2020). An investigation of gasoline pricing and its subsidies in Iran's economy. Journal of Economic Issues - Monthly Journal for Economic Issues Analysis, 20(1), 49-91. [In Persian]
Hosan, S., Rahman, M. M., Karmaker, S. C., & Saha, B. B. (2023). Energy subsidies and energy technology innovation: Policies for polygeneration systems diffusion. Energy, 126601.
Hoseininasab, S. E., & Hazeri Niri, H. (2012). Computable General Equilibrium Analysis of the Effect of Energy Carrier’s Subsidies Reform on Inflation and GDP. Economic Growth and Development Research, 2(7), 80-67. [In Persian]
In Persian
International Energy Agency. (2022).
Iran. Ministry of Power. Electricity and Energy Macro Planning Office. (2018). Energy balance. Tehran: Vice President of Electricity and Energy Affairs, Electricity and Energy Master Planning Office.
Johansson, P., Kriström, B. (2019), Welfare evaluation of subsidies to renewable energy in general equilibrium: Theory and application. Energy Economics, 83, 144-155.
Karimzadegan, H., & Meiboudia, H. (2012). Exploration of environmental literacy in science education curriculum in primary schools in Iran. Procedia-Social and Behavioral Sciences, 46, 404-409.‏
Loveless, B. (2015). World Bank economists seek oil subsidies’ end.
Madanizadeh S A, Ebrahimian M. (2021). Modeling Energy Price Liberalization in Iran Economy. JPBUD. 25(4), 5-46. [In Persian]
Mamipour, S., Sayadi, M., & Azizkhani, M. (2023). Theoretical analysis of gasoline pricing policies in Iran: Challenges and solutions. Biannual Journal Eqtesad-e Tatbigi, 9(2), 249-292. [In Persian]
Mamipour, S., Sayadi, M., & Jabbari Rad, M. J. (2020). Assessment and Prioritization of Alternative Gasoline Pricing Policies in Iran based on Economic, Social and Environmental Criteria. Iranian Energy Economics, 9(35), 159-201. [In Persian]
McCulloch, N., Moerenhout, T., & Yang, J. (2021). Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis. Energy policy, 156, 112336.‏
Ministry of Energy, Electricity and Energy Macro Planning Office (2018). Energy balance. Vice President of Electricity and Energy Affairs, Electricity and Energy Master Planning Office. [In Persian]
Mohammadi, M, (2014). The Effects of Targeting Subsidies on Prices of Different Economic Sectors (Data Envelopment Approach), University of Economics, Faculty of Economics, Master's Thesis. [In Persian]
Mohammadi, T., Pajooyan, J., & Abbazadeh, S. (2011). The impact of energy subsidy removal on gross domestic product in Iran. Applied Economics, 2(4), 1-24. [In Persian]
Neely, M. (2018). Which direction is Iran's economy going? (An abstract of a study plan for analyzing the effective factors on Iran's medium-term economic performance). Dunya-ye Eghtesad Publications, 2nd ed. [In Persian]
Nejabat E, Amirkhani A, Mooghali A, Darvish H. (2022). Identifying and explaining the characteristics of Good Subsidy. refahj. 21(83), 167-228. [In Persian]
Petkova, N., & Stanek, R. (2013). Analyzing energy subsidies in the countries of Eastern Europe, Caucasus and central Asia. In OECD Working Paper.
Prmeh, Z. (2005). the impact of energy subsidy and the energy price adjustments on inflation in Iranian economy. Iranian journal of trade studies (ijts), 9(34), 117-148. [in persian]
Rentschler, J., & Bazilian, M. (2018). Reforming fossil fuel subsidies: Drivers, barriers, and the state of progress. In Fossil Fuel Subsidy Reforms (pp. 7-30). Routledge.
Research Center of Islamic Consultative Assembly. (2019). Evaluation of the Performance of Law Targeting Subsidies on Energy Subsidies in Iran, Infrastructure and Production Studies Deputy of Research. [In Persian]
Saaty, T.L. (1980). the Analytic Hierarchy Process. RWS Publications, Pittsburgh.
Saaty, T.L., (1995). The Analytic Hierarchy Process: Planning, Priority Setting, Resource Allocation. McGraw-Hill, New York, NY, 030 pp.
Saddiki, A., Chaouti, A. (2022). Drivers and Barriers of Fossil Fuel Subsidy Reforms in Developing Countries: A Review.‏
Sadoughi Shahdani, M., & Khoshkhui, M. (2016). Analysis of the susceptibility of energy consumption behavior in the residential sector from the awareness approach of consumers (Using the Friedman ranking test). Quarterly Journal of Economic Strategies, 5(18). [In Persian]
SaidiPoor, B., & Pourali Marian, A. (2011). An investigation of challenges facing targeted subsidy payments. International Conference on Economic Jihad, Kerman, 1-10. [In Persian]
Solaymani, S. (2021). Energy subsidy reform evaluation research-reviews in Iran. Greenhouse Gases: Science and Technology, 11(3), 520-538.
Soleymani, A., & Ghaffarzadeh, H. (2021). Assessing the Effects of Household Economic Status on Energy Consumption (Case Study: Yazd City). Sustainability, Development & Environment, 2(4), 51-75.
[In Persian]
Taei Samiromi, F., Khalilian, S., Vakilpoor, M. H., & Najafi Alamdarlo, H. (2021). Investigating the multiple effects of adjusting the price of energy carriers on Major economic-environmental Indicators in the agricultural sector of Iran. Agricultural Economics and Development, 29(2), 215-248. doi: 10.30490/aead.2021.337521.1176. [In Persian]
Taghvaee, V. M., Arani, A. A., Soretz, S., & Agheli, L. (2023). Diesel demand elasticities and sustainable development pillars of economy, environment and social (health): comparing two strategies of subsidy removal and energy efficiency. Environment, Development and Sustainability, 25(3), 2285-2315.
Tashkini, A., Aryan, B., & Sabouri Dilami, M. (2009). Energy subsidy system: Problems and necessity of its review. Monthly Journal of Economic Issues: Special issue on targeted subsidies, 101, 141-160. [In Persian]
Zadeh, L. A. (1975). The concept of a linguistic variable and its application to approximate reasoning-III. Information sciences, 9(1), 43-80.‏
Zadeh, L.A. (1965). Fuzzy sets. Information and Control. (3): 33-303.
Zarepour, Z. (2022). Short-and long-run macroeconomic impacts of the 2010 Iranian energy subsidy reform. SN Business & Economics, 2(10), 151.