The Effect of Environmental Efficiency on the Industy Value Added of Natural Gas Consumption Over 2008-2014: A Case Study of Iran

The purpose of this study is to assess the environmental performance level and its impact on the value added of the Iranian provincial industries in terms of natural gas consumption, which is, in fact, an examination of the Kuznets environmental curve. For this purpose, the provincial panel data of the industrial sector of the country during the period of 2008-2014 was used. The environmental performance was calculated using the data envelopment analysis method based on the linear planning and the effect of environmental efficiency on the value added of the provincial industries. Arellano- Bond approach with the method of generalized moments is used. The variables used include the use of intermediate inputs from the industrial sector and natural gas consumption as inputs, the added value as a desirable output and the carbon dioxide emissions from natural gas consumption as an undesired output. The results indicate a significant and positive relationship between environmental performance and the value added of provincial industries. The results also confirm the existence of the Kuznets environmental curve in the period under review for the provincial industries of Iran. During this period, the environmental efficiency of the provincial industry sector is decreasing. Hence, suggestion number of policies are recommended as follows: encouraging industries to a higher efficiency performance, through Government support for efficient industries, paying subsidies, prioritizing these industries to consume resources at lower prices, encouraging the use of renewable energy and establishing environmental laws, as well as prioritizing efficient industries in the exports and imports of resources and goods, and the tax exemptions.