Causes and Consequences of Reforming in Electricity Production and Consumption Pattern on Promoting Sustainable Development in Iran: An Economic Analysis

Abstract

In line with the 2015 Paris Agreement, the present study examines the efficiency of Iran’s electricity industry compared to world standards. In 2018, Iran is ranked second in the world in terms of direct subsidies to the electricity industry, while subsidies for fossil fuels as the main feedstock for power plants are also higher. The results of the study indicate that despite the privatization of the electric industry since 2005, centralized economic management and the provision of extensive direct and indirect subsidies have led to the expansion of inefficiencies in the production and consumption of electricity. Lack of cost-based pricing is a major factor in the production of inefficient units and the determination of electricity prices at very low levels (as a result of subsidies) is the main reason for the inefficient use of electricity in Iran. The undeniable role of fossil fuels in energy production has stabilized Iran’s second-largest power plant sector in CO2 emissions in the Middle East, and as a consequence of no noticeable changes in the energy production process, the carbon intensity index and carbon intensity for electricity consumption, have fluctuated slightly. However, the energy intensity and energy intensity for electricity consumption, unlike the developed countries, have shown an upward trend, indicating a decline in energy and electrical energy efficiency in the Iranian economy. The index of fundamental reforms in electricity production, exactly the reverse of the successes in Iceland, Switzerland, Norway, Sweden and Luxembourg, is less than 8%, which is against sustainable development goals. It is crucial to take advantage of countries’ successful experiences in electricity price reform and to address the four key components proposed.