Determining the Subsidy Required for Investment in Research and Development in Line with the Policy of Reducing Air Pollution Using the Computable General Equilibrium Model: Case Study of Iran

Greenhouse gas emission abatement is an important issue at the center of attention worldwide with the aim of achieving sustainable economic growth. One of the policies put forward in this area is to subsidize investment in research and development and to levy tax on fossil fuels in order to make appropriate technical changes to reduce greenhouse gas emissions. The present paper determines the subsidy rate for investment in research and development to double it with using a computable general equilibrium model. It considers in the first scenarios subsidy payment for investment and in the second scenarios subsidy payment along with, the taxation of fossil fuel consumption. It then examines the economic, welfare and environmental impacts of these policies. The results of modeling and calibration show that in the first scenario, the subsidy rate for investment in research and development is 9.4% and in the second scenario it is 9. 1%. Meanwhile, the tax rate for fossil fuels in the second scenario is 2.5%. The results indicate a reduction in welfare in both scenarios, regardless of the social gains of reducing emissions. The results also show that both the energy tax policy, and research and development subsidy policy is able to reduce energy consumption and air pollution.