Driving forces of Iran's CO2 emissions from energy consumption: An LMDI decomposition approach

In order to address climate change in an effective manner, it is essential to quantify driving forces of CO2 emissions in the fossil-fuel rich countries. Iran is among the top ten CO2 emitting countries. Moreover, it has the largest natural gas reserve and the fourth largest oil reserve in the world. However, there is a lack of comprehensive analytical studies on quantifying the contributions of key drivers to Iran's CO2 emissions. This study fills this gap and performs in a systematic manner three variations of decomposition analyses on driving forces of carbon emissions from 2003 to 2014 due to energy consumption of the industry, driving forces of carbon intensity of the electricity generation, and key drivers of carbon emissions due to total fossil fuel combustion. In addition, the other novelty of this study is inclusion of the effect of electricity import and export in the decomposition analysis, which opens important avenues for analysis of emissions' driving factors in countries currently engaged, or will engage in electricity trade. In the discussion of results, we take an international perspective and discuss findings pertaining to Iran as a fuel-rich country. Furthermore, we demonstrate real applications of decomposition analysis in policymaking using real experiences of Iran. Major findings highlight that the main driver to Iran's CO2 emissions is increased consumption, which was responsible for an additional 201.5 MtCO2 since 2004, while technology-related improvements (e.g. energy mix) were only able to offset 7.7 MtCO2. Additional natural gas capacity, especially in the transport sector helps improve the energy mix, but would require more. Insights on electricity trading and hydropower are also presented, before we end with appropriate policy implications.