The review of substitution between energy and labor in industry sector of Iran (with emphasis on environmental policy)

In this study, according to destructive effects of energy consumption on the environment quality and its limits in Iran, substitution the labor instead of energy and its impact on the economy was investigated. estimation the elasticity of substitution between labor and energy for industry sector of Iran by using the CES production function and periodic observation (1980-2013) was performed.The result suggests that the amount of substitution elasticity is 0.48 percent.The other results of estimations show that by increasing the price of energy as an environmental policy reduced its consumption and on the other hand, because of the substitution between energy and labor increasing the labor demand can be seen. Increasing the energy price as an environmental policy can have two positive effects on the economy; on the one hand, occurs reducing the energy consumption and improvement of the environment and on the other hand by substitution the labor instead of energy the labor demand and employment increases.