Economic impacts of producing bioethanol in Iran: A CGE approach

Abstract

Despite environmental pollution problems and excessive energy consumption, Iran is one of the few countries that have had no biofuel consumption. This country is planning to produce and use bioethanol as a gasoline enhancer to cope with its pollution problems. In this study, we applied a CGE model for Iran to analyze the economic impacts of ethanol production on the economic growth and household income in rural and urban levels in different scenarios. These scenarios are different in the feedstocks used to produce bioethanol (as from corn, sweet sorghum or salicornia). Also, they differ in terms of the amount of ethanol production (1800 and 3600 million liters) to blend with gasoline and produce E5 and E10. The results show that using imported low-quality corn as a feedstock for ethanol production can affect the economy negatively. Among the investigated scenarios, producing 3600 million liters of bioethanol annually by cultivating sweet sorghum would be the best alternative regarding the economic impacts. The cultivation of this crop can cause nearly 0.4% growth in the GDP and increase the urban and rural household income by 0.5% and 0.17%, respectively. Iran and other oil producers in the Middle East have the potential of producing salt-tolerant plants due to their vast arid and semi-arid areas. Also, they can rely on their domestic resources to produce bioethanol.