Tradable Energy Quotas: A new Approach to Reform Energy Subsity in Iran

Document Type : Research Paper

Authors

1 Assistant Professor, Faculty of Economics, University of Tehran

2 Iran Institutional Investors Association

3 University of Tehran, Faculty of Economics

Abstract

This paper proposes tradable energy quotas for energy subsidy reform in Iran. This approach is merely proposed to departure from current situation to a favorable one using a virtual currency and based on a fairly designed energy basket. The main advantage of this approach is a decentralized distribution system in which indentical quotas of individuals can simply be traded in a particular market. Our studies show that through this mechanism the poorest segments in income distribution of population will be major winners. Moreover, after a 5-year period of implementing this proposal the energy price will be totally determined in the market. Also, the impacts of implementation of this idea has been studied and illustrated under different scenarios. In all of introduced scenarios, in welfare gap between segments will decrease and the total benefit of this plan would be between 500 000 to 1 400 000 billion Rials based on the chosen scenario.

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Main Subjects

References

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Strategic Studies of public policy
Volume 10, Issue 37
March 2021
Pages 204-243

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