Iran may soon launch a carbon trading market in an effort to reduce emissions of greenhouse gases and slow the country’s contribution to climate change.
Mehdi Sharif, director for energy efficiency at Iran’s Fuel Conservation Organization (IFCO) announced that preliminary studies are underway for a proposal that would establish a trading scheme. After the studies are completed, the proposal will be submitted to the government and parliament for approval.
“Reducing energy consumption and capping carbon emission are two sides of the coin,” Sharif said. “When energy consumption declines, carbon emission will also fall.”
Iran sits on considerable fossil fuel reserves, including massive deposits of natural gas.
The country is also a significant exporter of crude oil. In January, oil exports in Iran increased to 1.32 million barrels per day, a rise of 100,000 barrels per day compared to the average monthly export rate in 2013. Petroleum exports account for more than three-quarters of the value of all Iranian exports.
In Iran, fossil-fuel production and consumption has been spurred on by robust subsidies.
Consumption subsidies, which artificially lower prices for consumers, are particularly egregious in Iran, where diesel sells for a rock bottom $0.45 per gallon. According to a 2012 IEA report, Iran has the highest consumption subsidies of any nation in the world, totaling $82 billion—an astounding 17 percent of the country’s GDP.
Despite having some hydroelectric infrastructure in place, Iran depends heavily on fossil fuels to power their grid. Besides encouraging rampant consumption of these dirty energy sources, subsidies make it nearly impossible for hydroelectric—not to mention other renewable sources such as solar and wind—to attract investment.
Although it has not yet been announced which particular sectors would be governed by the carbon emissions trading scheme, it is likely that the new carbon market could make renewable energy a more attractive option from a financial perspective.
Iranians would likely welcome an increase in renewable energy development from a health perspective as well, considering that air pollution has lead to dozens of hospitalizations and the wide-scale closure of schools and offices in recent years.
If the carbon market is approved, Iran will join a small but growing list of nations that have enacted carbon trading in order to stem the tide of climate change, including the members of the European Union as well as Mexico, India, and China.