Presentation of Energy Efficiency Model in Iranian Economy Using Dynamic Optimization Approach

This paper is based on dynamic optimization methodology to investigate the economic energy efficiency issues in Iranian Economy. The paper introduces some definitions about energy efficiency both in economics and physics, and establishes a quantitative way for measuring the economic energy efficiency.
The linkage between economic energy efficiency, energy consumption and capital stock is demonstrated primarily. Using the methodology of dynamic optimization, a maximum problem of economic energy efficiency over time, which is subjected to the extended Solow growth model and instantaneous investment rate, is modelled. In this model, the energy consumption is set as a control variable and the capital is regarded as a state variable. The analytic solutions can be derived and the diagrammatic analysis provides saddle-point equilibrium.