The effect of higher fuel price on pollutants emission in Iran

Abstract

A key aspect of sustainable development in a country is how energy, environment and economic sectors interact. Greenhouse gas emissions and their impacts are among important environmental issues that have been in focus. The increase in the concentration of these gases in atmosphere to levels above the natural level results in global warming, depletion of the Earth's protective layer against harmful solar radiation, and threatening whole natural life. The present study aimed at examining the factors affecting CO2 emission in Iran in 1981-2015. The studied variables included per capita CO2 emission, fuel price, per capita production, and per capita energy consumption. The relationship was examined by auto-regressive distributed lag (ARDL) model. It was found that CO2 emission is related to actual price of fuel indirectly and to per capita production and per capita energy consumption directly. According to the findings, 1% higher price of fuel would decrease CO2 emission by 0.14%, while 1% higher per capita production would increase it by 0.59%. Given the effectiveness of subsidy reform policy and the increased price of fuel on the alleviation of greenhouse gas emissions by road transport sector, it is advisable to gradually increase fuel price until it reaches FOB price in the Persian Gulf.