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This Policy Note is based on the Final
Report of the Environmental Energy Review (EER), prepared
over two years, with the full collaboration of the
Government of Iran, and the assistance of international, and
national consultants. The EER report comprises: an analysis
of the current situation with regards to energy generation,
and use; an evaluation of the growth prospects with regard
to energy generation, and use; the identification of the
environmental issues induced by the generation, and use of
energy, and the cost estimates of damages; the evaluation of
the extent of contribution to the climate-change phenomenon,
through emission of greenhouse gases; the evaluation of the
proposed mitigating measures for previously identified
environmental problems; conclusions and recommendations;
and, a proposal for an action plan. The emphasis of the EER
is on air pollution, being the most extreme, visible sign of
environmental damage, certainly in the large cities. The
major source of air pollution is the energy sector, key to
the Iranian economy, and, the main engine of future economic
growth, though a principal cause of environmental pollution,
and a major source of market distortion. The challenge
therefore is to recommend the necessary policy reforms and
sectoral measures that will substantially reduce damage
costs, in the case that no reform or measures are
introduced. In order to better define the options, and their
impacts, a total of twelve scenarios were analyzed,
characterized by a combination of four price reform
scenarios, and three different sets of measures. Major
conclusions from this analysis suggest rapid price reform,
as a strategy for the environment, through a combination of
price reform, plus appropriate sectoral measures. If price
reform is delayed past 2009, then the country can improve
its financial cash-flow by providing financial incentives to
the efficient use of energy, and to the substitution of
fuel-oil by natural gas, avoiding subsidies, and instead
fund other environmental control measures, where the costs
are not easily assigned to the polluter. The policy note
also proposes an Action Plan to implement the main sectoral
policies described above.
