Assessment of the Welfare and Environmental Impacts of Unbalanced Pricing Policy on Fossil Fuels in Different Regions of Iran: Application of a Dynamic Regional General Equilibrium Model

In this article, we explore the welfare and environmental impacts of unbalance pricing on fossil energy in different areas of Iran using a regional dynamic general equilibrium model. For this purpose, initially, the willingness of each province to avoid the harmful impacts of pollution is calculated and then, based on the results of the calculations, the provinces are classified into eight regions. Then, we define two different policy scenarios and compare their results. The two scenarios include a base scenario (i.e. without taxes and government intervention) and unbalanced pricing of fossil energy for different regions. The effects of different policies are investigated in 35 periods of 10 years. According to the results of the study, internalizing the costs of environmental pollution has positive environmental impacts, while the effects of welfare factors on unbalanced pricing are not statistically significant. Accordingly, an unbalanced pricing policy of fossil fuels is recommended to improve the quality of the environment.