An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix

Manzoor, Davood and Shahmoradi, Asghar and Haqiqi, Iman (2010): An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix. Published in: Quarterly Energy Economics Review , Vol. 7, No. 26 (2010): pp. 21-54.

Abstract

This paper identifies two types of implicit and explicit energy subsidies in Iran. Using a computable general equilibrium model, we analyze the impacts of reducing implicit and explicit energy subsidies. The model is based on a Modified Micro Consistent Matrix of MOE (the Ministry of Energy) which includes implicit subsidies. The model consists of 36 commodity groups and 18 economic activities. Our findings suggest that overall economic activity and consumer welfare will be reduced following the reduction of energy subsidies. Energy exports would increase and nonenergy exports decline. Economic activity will decline across all sectors except for upstream energy activities. Domestic energy demand by households and producers would decline as well.

• Item Type: MPRA Paper
• Language: Persian
• Keywords: implicit subsidy, energy policy, computable general equilibrium, energy demand, sector specific factor
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C67 - Input-Output Models; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy

References

Böhringer, C. (2006). Environmental Tax Differentiation Between Industries and Households Implications for Efficiency and Employment- A MultiSector Intertemporal CGE Analysis. Centre for European Economic Research (ZEW), Mannheim.

Holmøy, E. (2005). The Anatomy of Electricity Demand: A CGE Decomposition for Norway. Statistics Norway, Research Department, Discussion Papers.

IMF. (2008). Subsidies In The Islamic Republic Of Iran. IMF Country Report No. 08/285.

Jensen, J. , & David, T. (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.

Kerkelä, L. (2004). Distortion costs and effects of price liberalisation in Russian energy markets: A CGE analysis. BOFIT Discussion Papers.

Küster, R. , Ellersdorfer, I. , & Fahl, U. (2007). A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications. CCMP – Climate Change Modelling and Policy.

Paltsev, S. , & Jacoby, H. D. (2004). Modeling the Transport Sector: The Role of Existing Fuel Taxes in Climate Policy. Joint Program on the Science and Policy of Global Change.

Rutherford, T. , Böhringer, C. , & Hoffmann, T. (2006). Alternative Strategies for Promoting Renewable Energy in EU Electricity Markets. Centre for European Economic Research.

Shahmoradi, A. and Manzoor, D. and Haqiqi I. (2009), An analysis of Energy Price Reform: A CGE Approach; International energy workshop.

Solow, J. L. (1985). General Equilibrium Incidence of Energy Taxation. Southern Economic Journal , 51, 1018-1030.

Weyant, J. P. (1985). General Economic Equilibrium As a Unifying Concept in Energy-Economic. Management Science , 548-563.

Yusuf, A. A. , & Resosudarmo, B. P. (2007). Searching for Equitable Energy Price Reform for Indonesia. Department of Economics, Padjadjaran University.