Impacts of Energy Price Increase and Cash Subsidy Payments on Energy Demand

Manzoor, Davood and Haqiqi, Iman (2013): Impacts of Energy Price Increase and Cash Subsidy Payments on Energy Demand. Published in: Journal of Trade Studies , Vol. 17, No. 67 (2013): pp. 101-124.

Abstract

Energy demand is mainly a function of own price, price of substitute energies, the activity level of sectors, cost of materials and labor and capital, cost-share of energy, elasticity of substitution parameters and households income. The main purpose of this paper is to measure the changes in energy demand after energy price increase and cash subsidy payment to households. We apply a Computable General Equilibrium (CGE) model of Iran as a small open economy. The model is specialized in modeling energy market in Iran. We consider 7 energy goods; the discriminatory energy prices are considered between sectors, and energy markets are modeled to show how government controls the prices. The model is calibrated based on Energy Micro Consistent Matrix (EMCM) of Ministry of Energy. We found that chemical Industry and Transportation Services face the highest reduction in sectoral energy demand. In the counterfactual scenario, the relative price of electricity compared to other energies declines. Therefore electricity demand would increase in the long run when compared to short-run demand level. But as expected, the gas-oil and fuel demand would decrease in the long run.

• Item Type: MPRA Paper
• Language: Persian
• Keywords: energy demand; energy price; price control; cash subsidy; computable general equilibrium; CGE
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy

References

خياباني، ناصر 1387. يك الگوي تعادل عمومي قابل محاسبه براي ارزيابي افزايش قيمت تمام حاملهاي انرژي در اقتصاد ايران، مطالعات اقتصاد انرژي.

شاهمرادي، اصغر؛ ایمان حقيقي و راضیه زاهدي 1390؛ بررسي اثرات افزايش قيمت حاملهای انرژي و پرداخت يارانه نقدي در ايران: رويكرد CGE ،فصلنامه پژوهشها و سياستهاي اقتصادي، شماره 57 ،ص. 5

. شاهمرادي، اصغر؛ ایمان حقيقي و راضیه زاهدي 1388؛ تحليل تأثير سياستهاي قيمتي در بخشهاي اقتصادي، وزارت نيرو، معاونت برنامهريزي و امور اقتصادي

. شاهمرادي، اصغر؛ داوود منظور و ایمان حقيقي 1389؛ اثرات حذف يارانه آشکار و پنهان انرژي در ايران: مدلسازی تعادل عمومي محاسبه پذیر بر مبناي ماتريس داده هاي خرد تعديل شده، مطالعات اقتصاد انرژي، شماره 7( 26 ،)صص21-5

Aydin, Levent, Mustafa Acar (2011); “Economic Impact of Oil Price Shocks on the Turkish Economy in the Coming Decades: A Dynamic CGE Analysis”, Energy Policy, Elsevier, vol. 39(3), pp. 1722-1731.

Jensen, J., D. Tarr (2002); “Trades, Foreign Exchange Rate, and Energy Policies in Iran: Reform Agenda, Economic Implications, and Impact on the Poor”, World Bank, Policy Research Working Paper, 2768.

Nicholson Walter Snyder Christopher (2011); Microeconomic Theory: Basic Principles and Extensions Cengage Learning.

Sancho, Ferran (2010); “Double Dividend Effectiveness of Energy Tax Policies and the Elasticity of Substitution: A CGE Appraisal”, Energy Policy, Elsevier, vol. 38(6), pp. 2927-2933.