The effect of increasing electricity price on rebound effect in Iran by computable general equilibrium

The main goal of policies to increase the energy efficiency is reducing energy consumption, but this goal is limited by the rebound effect. In the literature of energy economics, there are two types of non-price and market tools to reduce rebound effects. Among the market tools, energy taxation is a favored approach. In the Iranian economy, where the prices of energy carriers, including electricity, are lower than their actual prices, and the government is paying consumers a hidden subsidy, trying to reduce energy subsidies is like taxing. In this paper, it is attempted to estimate recurrent effects by applying Social Accounting Matrix of 2011 and Computable General Equilibrium Model of Return Effects in two scenarios of 10% increase in electricity efficiency and simultaneous increase of 10% efficiency and 10% electricity price. The model results show that the energy rebound effects are 112% if efficiency is increased that means energy consumption growth by 1.2 percent but rebound effect may decreases to 99% if price and efficiency increase simultaneously. The high rebound effects observed are due to the relative price reduction of energy and thus to increased consumption. Also, the efficiency-enhancing policy also encourages 0.04% of the level of economic activity in manufacturing sectors, which is another factor in the increase in energy consumption as well as exports in this scenario 0.3% Growth. In contrast, in the policy of simultaneously increasing energy efficiency and price, the level of consumption will decrease by 0.1 percent, the level of activity of manufacturing sectors will be 0.08 percent and exports will be 0.5 percent.