The Effect of Eliminating Electricity Subsidy on its Energy Intensity in Iran's Production Industries

This article tries to analyze the effect of eliminating the electricity subsidy on the intensity of this energy in production industries during 1995-2007 using GMM dynamic panel data method. Having used the cost function with Cobb-Douglas form, it was recognized that there is a negative and significant relationship between electricity intensity and its price. Meanwhile, the increase in the price indices of other inputs leads to electricity energy substitution with such other inputs. Moreover, energy intensity decreases along the technological advances with the pass of time. Later, electricity price liberalization scenario starts to hypothetically and steadily increase its nominal price within 2010-2014. The findings show that the electricity energy intensity decreased after its price is liberalized in a way that the lion’s share of such a slash belonged to the first year of the liberalization policy execution while the amount of energy intensity cut was decreased over the next years.