Economic, welfare and environmental impact of feed-in tariff policy: A case study in Iran

Following a particular attention given to environmental issues over the last few decades, establishing proper developmental policies to increase electricity production from renewable energy (RE) has not only been an important issue but also a challenge for many countries. Feed-in Tariff (FIT) Policy is one of the tools that is being used to facilitate the development of RE. This research evaluated the economic, welfare and environmental impact of this policy on Iran's economy. Therefore, after developing an Economic-Energy-Environmental (E3) type of Hybrid General Equilibrium model, the effect of FIT policy was examined under different scenarios in order to find an optimal condition in which 10% of electrical energy could be produced from renewable resources. The comparison between the results showed that the application of subsidies to RE and the way the government finances these subsidies can affect the results of FIT policy. Meanwhile, regardless of the role considered for the impact of environmental factors, our policies under the scenario of technology neutral is the most efficient, as it has less impact on the decline of GDP of different sectors and also has less financial cost for government.