How much do Iran's energy subsidies cost?In 2010, Iran's energy subsidies were estimated at around $70 billion (Salehi-Isfahani et al 2015), a significant burden that contributed to fiscal deficits and hindered investment in critical infrastructure.
Why is subsidy reform important in Iran?The policy research to date has focused on subsidy removal, renewable energy integration, energy efficiency improvements, governance restructuring, and the role of international sanctions in shaping Iran’s energy landscape. Subsidy reform is a particularly important and contentious topic due to its implications for Iran’s economy.
Will Iran's energy sector continue to impose economic and environmental costs?This pattern underscores the inefficiencies generated by Iran’s heavy energy subsidies and supports the argument that without structural reforms, Iran’s energy sector will continue to impose economic and environmental costs on the nation.
How does Iran's subsidized fuel smuggled abroad affect its economy?For example, up to 15 percent of Iran's subsidized fuel is smuggled abroad (Farhikhtegandaily 2025), resulting in lost domestic revenue and reinforcing inefficiencies. The economic pressure that sanctions place on Iran make immediate internal reform of Iran’s energy sector all the more relevant.
How can Iran transform its energy policy?For sustainable transformation, Iran must align its energy policies with global trends and future challenges: A comprehensive national energy transition framework is essential. This plan should set ambitious targets for renewable energy adoption, carbon emissions reductions, and energy efficiency improvements.
What are the structural and institutional inefficiencies undermining Iran's energy sector?This paper has analyzed the structural and institutional inefficiencies undermining Iran’s energy sector—ranging from excessive dependence on fossil fuels and poorly targeted subsidies to chronic underinvestment in infrastructure and the compounding effects of international sanctio
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In 2010, Iran's energy subsidies were estimated at around $70 billion (Salehi-Isfahani et al 2015), a significant burden that contributed to fiscal deficits and hindered investment in critical infrastructure.
The policy research to date has focused on subsidy removal, renewable energy integration, energy efficiency improvements, governance restructuring, and the role of international sanctions in shaping Iran’s energy landscape. Subsidy reform is a particularly important and contentious topic due to its implications for Iran’s economy.
This pattern underscores the inefficiencies generated by Iran’s heavy energy subsidies and supports the argument that without structural reforms, Iran’s energy sector will continue to impose economic and environmental costs on the nation.
For example, up to 15 percent of Iran's subsidized fuel is smuggled abroad (Farhikhtegandaily 2025), resulting in lost domestic revenue and reinforcing inefficiencies. The economic pressure that sanctions place on Iran make immediate internal reform of Iran’s energy sector all the more relevant.
For sustainable transformation, Iran must align its energy policies with global trends and future challenges: A comprehensive national energy transition framework is essential. This plan should set ambitious targets for renewable energy adoption, carbon emissions reductions, and energy efficiency improvements.
This paper has analyzed the structural and institutional inefficiencies undermining Iran’s energy sector—ranging from excessive dependence on fossil fuels and poorly targeted subsidies to chronic underinvestment in infrastructure and the compounding effects of international sanctions.
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