The Impacts of Environmental Policies on Natural Gas Consumption in Iranian Industrial Sector

This study aims to evaluate the effects of environmental policies, including price and non-price policies, on natural gas demand in Iranian industrial sector. To this end, considering the dynamic nature of our panel data, we adopted a generalized method of moments (GMM) model to estimate natural gas consumption for 22 Iranian industries from 2005 to 2015. The results state that the average annual natural gas consumption has been rising, reaching five times higher than the consumption of other fossil fuels. Among the industries, nonmetallic minerals industry with 8% of the total production of industry sector and more than 25% of natural gas consumption was regarded as the most natural gas consumer. The results of our GMM model show that non-price environmental policies are more effective than the price policies on natural gas consumption. Overall, in non-price policies, energy intensity seems more important than CO2 emission reduction. We therefore recommend that governmental energy policies should focus more on energy intensity improvement in Iranian industries through technological enhancement and fuel energy saving regulations.