Abstract
Cheap fossil energy leads to overconsumption of energy and hazardous levels of air pollution. In this study, we provide a framework to connect fossil energy price policy to private consumption of energy and outdoor air pollution. We used a consumer demand system and reassessed it for the recent status of the Iranian economy. We extracted household consumption information from Iran’s 2011 and 2014−2016 annual household surveys (n=154683), prices from the Central Bank of Iran’s detailed monthly price indices from 2008 to 2016, and air pollution information from Iran’s Energy Balance Sheets. We estimated that an average Iranian household would reduce its energy consumption by 2%, 16%, 29%, 38%, and 45% if energy prices were hiked by 10%, 50%, 100%, 150%, and 200%, respectively. The corresponding reductions in total outdoor air pollution in the post-hike period would be 2.6, 26.3, 47.6, 62.9, and 74.5 million tons, respectively. Besides highlighting the importance of fossil energy price policy as a short-term strategy to reduce air pollution, this study calls attention to shifting the existing subsidies on fossil fuels to sustainable sources of energy such as waste-oriented biofuels as a -long-term solution.
Highlights
➢Fossil Energy price subsidy encourages overconsumption and elevates air pollution. ➢A 100% energy price hike leads to a 29% decrease in household energy consumption. ➢A 100% energy price hike leads to a 62.9 million ton reduction in air pollutants. ➢A 200% energy price hike leads to a 45% decrease in household energy consumption. ➢A 200% energy price hike leads to a 74.5 million ton reduction in air pollutants
The estimated range of energy price elasticity for Iran is in the range of what is estimated for other countries
The results show that a 50% increase in energy carriers’ prices, can lead to 910130, 25381389, 50874, 324, 5301, 3274, and 4852 tons decreases in carbon monoxide (CO), CO2, nitrogen oxides (NOx), N2O, sulfur oxides (SOx), CH4, and particulate matter ≤10 μ (PM10) levels, respectively
Summary
➢Fossil Energy price subsidy encourages overconsumption and elevates air pollution. ➢A 100% energy price hike leads to a 29% decrease in household energy consumption. ➢A 100% energy price hike leads to a 62.9 million ton reduction in air pollutants. ➢A 200% energy price hike leads to a 45% decrease in household energy consumption. ➢A 200% energy price hike leads to a 74.5 million ton reduction in air pollutants. The effects of the high levels of air pollution on Iranians’ health are well documented (Dehghan et al, 2018, Bayat et al, 2019; Sicard et al, 2019; Karimi et al, 2020) If it is gradual and allows for households’ and businesses’ adjustment and is coupled with an expansion of safety nets, cutting energy price subsidies is redistributive and has public health benefits. Measuring the public health benefits of reduction in outdoor air pollution by cutting energy subsidies, is challenging because it requires accounting for households’ complementary and substitutionary reactions to price changes. A QUAIDS model that had been designed and estimated to measure the impacts of a change in energy prices on Iranian households’ energy consumption was re-evaluated with the recent data on prices and household consumption. This study sits at the intersection of energy and environmental health policies
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