Analysis of Electricity Generation’s Externalities on Sectorial Output Growth and Welfare in Iran

Environmental problems are one of the most challenging issues for the entire world and each country. In economic studies, environmental issues are analyzed as negative externalities. In this article, the negative externalities of electricity production on the output growth of different sectors and household’s welfare in Iran’s economy have been studied through price system using Computable General Equilibrium (CGE) model empirically. In this regard, Iran’s Social Accounting Matrix of 2011 and GAMS software by introducing five scenarios related to environmental effects of electricity production have been used. The results show that firstly, the internalization of electricity production externalities reduces the output of agriculture and industry sectors in all scenarios, while the output of services will increase. Secondly, internalization of electricity production externalities increases total economy’s output and declines the household’s welfare.