Transcript the energy environment review (eer) in the islamic republic of iran (iri)

THE ENERGY ENVIRONMENT REVIEW (EER)
IN THE
ISLAMIC REPUBLIC OF IRAN (IRI)
BY
SHERIF ARIF
REGIONAL ENVIRONMENTAL AND
SAFEGUARD ADVISOR, MNA
PRESENTED AT THE
WORKSHOP OF CEA, SEA AND DPL
JANUARY 18, 2005
Structure of the Presentation
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The Fuel for Thought Strategy and the
EER
The Energy Sector in Iran
Damage Costs due to Air Pollution
Policy Options for Reducing Damage
Costs
Outcome
The EER Concept
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The Energy and Environment Review is
a specific tool proposed in Fuel for
Thought: An Environmental Strategy for
the Energy Sector as an instrument to
help set operational priorities for
mainstreaming the environment
EER OBJECTIVES
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The main objectives in this strategy are
to:
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facilitate more efficient use and substitution
of traditional fuels;
protect the health of urban residents from
air pollution due to fuel combustion;
promote environmentally sustainable
development of energy resources;
mitigate potential impacts of energy use on
global climate change; and
develop capacity for environmental
regulation, monitoring and enforcement
WHY EER IN IRAN
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The Government of Iran (GOI) has requested
the World Bank assistance to integrate
environment priorities into its energy sector,
with the intention that some of its
recommendations could be included in the 4th
Five Year Development Plan (2005-2010).
The objective of the 4th Five Year
Development Plan to achieve fast and
sustainable growth and accelerate the
transition to a market economy.
The suggested actions will promote economic
efficiency through a proper allocation of scarce
resources, including environmental resources,
so as to achieve economic efficiency and
environmental and social protection.
CONTENT OF THE STUDY
The study consisted of:
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An analysis of the current situation with regards
to energy generation and use;
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An evaluation of the growth prospects with
regards to energy generation and use;
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The identification of the environmental issues
induced by the generation and use of energy and
estimation of the costs of the damages;
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The evaluation of the extent of contribution to
the climate-change phenomenon through
emission of greenhouse gases;
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The evaluation of the proposed mitigating
measures for the previously identified
environmental problems; and
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Conclusions and recommendations, and a
proposal for an action plan.
SIZE OF IRAN’S ECONOMY AND ITS
ENERGY SECTOR
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Iran population is 64.5 million (2002)
Its GDP is US$ 114 billion,
Economic growth in 2001/02 is estimated at
5.7%; this is the highest rate of growth since
1992.
Nominal GDP per capita in 2002 was 1710
US$/capita
Iran is OPEC’s second largest oil producer; at
the end of 2002 it possessed 12.3 billion tons
of proved reserves, amounting to 8.3% of
global proved reserves.
In 2002, there were 23 trillion cubic metres
of proved reserves of natural gas in Iran,
equivalent to 14.8% of known world
reserves and the second largest in the world
after the Russian Federation.
ENERGY DEMAND IN IRAN IN 2001
300
250
mboe/year
Elec’y
LPG
200
Fueloil
Gasoil
150
Kerosene
Gasoline
100
Natural Gas
Solid fuels
50
0
Agriculture.
ResComm
Industry
Transport
Others
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Energy in the domestic
market is heavily
subsidized.
The target increase in
energy price of 10% per
annum is lower than
inflation (11.4 % in 2001).
The EER estimated the
total subsidy in 2001 at
118x1012 Rials (US$ 15
billion).
Energy subsidies amount
to 17.8% of the Iranian
GDP
10^12 Rls ($1 bn = 8x10^12 Rls)
Subsidies in Iran
40
35
30
Others
25
Transport
20
Industry
15
ResComm
10
Agriculture
5
0
Natural Elect Gaso- Kero- Gasoil Fuel LPG
Gas
line sene
Oil
Damage Costs in Iran
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A first-order estimate of the benefit
values for local pollutants in Iran was
made by scaling ExternE values
according to the relative GDP per
capita measured at parity purchasing
power (PPP).
No local studies were found for
calibration
MAGNITUDE OF DAMAGE
COSTS IN IRAN
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The annual sum of damage from all
sources in 2001 was estimated at:
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56 Trillion ($7 billion); this is
equivalent to 8.4% of nominal GDP
IN ADJUSTING FOR PPP, DAMAGE
COSTS ARE 2.3% OF GDP
Distribution of Damage by Sector
and Fuel
Damage costs by activity
Damage costs by energy form
Oil refining
Natgas
Pow erGen
Elec
Agriculture
Gasoline
ResComm
Kerosene
Industry
Gasoil
Transport
Others
FuelOil
LPG
The Damage Growth in Iran
The main problem in Iran is the growth of
pollution from private gasoline vehicles
10^12 Rls (US$1 bn = 8x10^12 Rls)
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180
160
140
120
CO
100
NOx
80
SO2
60
PM10
40
20
0
2001
2004
2009
2014
2019
DAMAGE GROWTH BY SECTOR
10 12 Rls (US$1 bn = 8x1012 Rls)
100
Others
80
Transport
Industry
60
ResComm
40
Agriculture
PowerGen
20
Oil refining
0
2001
2004
2009
2014
2019
POLICY OPTIONS
The EER examined the consequences of:
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price reform policies ;and
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sectoral measures, separately and in
combination.
By a sectoral measure is meant an
intervention that aim to cause a
specific behavioural change, e.g.
through targeted financial incentives
and standards for equipment and
appliances.
Impacts of price reform in Iran
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The EER examined three scenarios for price
reform with end dates: 2009 - end of 4th
Plan; 2014 - end of the 5th Plan; 2019 - end
of 6th Plan
With price reform, the total damage cost in
2019 is 81 Trillion Rials ($US10 billion)
compared to 155 Trillion Rials ($US19
billion) under the reference scenario.
The cost is still higher than in 2001. Price
reform will avoid annual environmental
damage by 2019 of 74 Trillion Rls ($US9
billion).
Damage costs by pollutant in selected
years under reform (In trillion Rials)
100
80
CO
60
NOx
SO2
40
PM10
20
0
2004
No
-09
-14 -19
2009
No
-09
-14 -19
2014
No
-09
2019
-14 -19
Options for Partial Price Reform
in Iran
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Political constraints and the inflationary
impacts of price reform could prevent
the introduction of cost-effective prices
even by 2019.
Which energy prices should be
addressed in a partial reform process?
Which would give the most
environmental benefit?
Damage cost savings per % price
increase
Damage Cost in 2019
trillion Rials
120
115
Gasoline
110
Kerosene
Gasoil
105
FO
100
NatGas
95
Elec (residential)
90
0%
5%
10%
15%
annual % price increase
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Gas-oil and gasoline give the biggest savings in
damage per unit of price increase
Classification of measures
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Sectoral measures were classified as follows:
 A: Measure is win-win
 B: Measure is cost-effective if local damage
savings are included
 C: Measure is cost-effective only when
global damage savings are incorporated;
suitable for CDM activities
 D: Measure is not cost-effective
 X: Either insufficient data is available to
conduct a CBA or the topic does not lend
itself to the methodology
Sectoral Measures Proposed
Mainstreaming the environment
Public awareness raising
Reduction of flaring
Management of drilling mud / fluids
Renewable energy
Flue Gas Desulphurisation at power plant.
Reducing fugitive emissions at refineries
Reduction of T&D Losses in electricity
Reduction in losses from oil and gas network
Price reform for energy products
Reduction in the S content of middle distillates
Inspection and maintenance of vehicles
Exhaust emissions standards for new vehicles
Congestion management for transport
Enhancing public transport
Increased use of CNG in vehicles
Energy Efficiency fund for the industrial sector
Energy efficiency fund for rescomm
Demand side management programme
Building efficiency standards
Standards and labelling for appliances
Switching oil to natural gas in industry
Switching oil to natural gas in rescom
Fuel switching from diesel to electricity
Management of CH4 from landfills
X
X
C
X
C
B
C
A
X
A
B
A
B
X
C
A
A
A
C
X
B & C
A
D
A
C
Impact on the Environment of Measures
without Price Reform
The estimated annual damage cost savings induced by
sectoral measures by 2019 is around 29 Trillion Rials
($US3.5 billion). Sectoral measures by themselves are
only partially effective. Damage continues to grow
and is higher in each of the snapshot years than in
2004.
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Damage cost (10 12 Rials)
100
80
CO
60
NOx
SO2
40
PM10
20
0
2004
No
Yes
2009
No
Yes
2014
No
Yes
2019
Sectoral Measures and Price Reform
Combined
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The combined effect reduces damage substantially
below the 2004 value by 2009 in all three cases.
Even by 2019 the damage is less than in 2004.
Only the combination of measures and price reform
will achieve a cleaner environment in 2019 than now.
Price reform by 2009 plus sectoral measures provides
the cleanest environment over the period.
100
12
Damage cost (10 Rials)
90
80
70
60
CO
50
NOx
40
SO2
30
PM10
20
10
0
2004
No
-09
-14
-19
2009
No
-09
-14
-19
2014
No
-09
-14
-19
2019
OUTCOME OF THE EER
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The EER recommendations were included in
the forthcoming fourth year development plan
as follows:
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Increase of the energy fuels ( gasoline, diesel, and
electricity should reach their real market values by
2009;
The gasoline price was increased from 600 Rials per
liter ( 7 cents/liter) to 850 Rials per year (10
cents/liter).
As of March 21 2005, The gasoline price above the
subsidized quota will be 2200 Rials/liter ( 25.6 cents
per liter). It is expected that the price of gasoline
should reach its market value in 2009.
Diesel fuel was increased by 15 percent from 120
Rials/liter ( 1.4 cents/liter) to 165 Rials/liter ( 1.9
cents/liter);
Electricity price increased by 20%.
OUTCOME OF THE EER
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Major recommendations will be included
in the CAS ( under preparation)
EER report was used by the Carbon
Business Finance Unit for considering
carbon emission reduction opportunities
during a WB mission in September 2004
EER unit in DOE is still functional
THANK YOU VERY MUCH FOR
YOUR KIND ATTENTION