The Environmental Effects of the Omission of Energy Carriers Subsidies in Iranian Manufacturing Sector

The purpose of this study is to investigate the changes in the level of environmental emissions caused buy consunption energy in the manufacturing sector, after the adjustments made for energy subsidies. We first estimated the demand functions for energy for two digits (isic) manufactures within the period 1374-1386. The methodology in this study is based on the two-steps cost functions, which in the first step the demand functions for a trans-log sub-model of energy (electricity, gas, oil and other energy carriers) and in the second step, the demand functions for manufacturing inputs (capital, labour and energy) were estimated. Then, we calculated the quantity of changes in the consumption of energy carriers by the means of price elasticitties, after omission subsidies and the changes in the level of energy consumption. The findings of this study are as follows: The Pindyck self-price elasticities of electricity, gas, oil and other energy carries show that one percent increase in the price of each of these variables cause 0.18, 0.34 and 0.87 percent decrease in the consumption, respectiuely. The most reduction emission is due to CO2 gas. Clearly, the most pollutent gas in manufacturing sector in due to CO2 gas.