An Estimation of energy Efficiency in Iranian Industrial Sector Based on a Partial Adjustment Demand Function

Using a partial demand adjustment function, the present study seeks to analyze and estimate the end-use energy efficiency in major Iranian industries. Coefficients of the model include dynamic adjustment rate, direct and indirect price elasticity, income elasticity, and capital intensive coefficient which have been estimated separately for the three energy carriers of electricity, natural gas, and oil derivatives through using panel data of 1979-1999. The model has been estimated for both high energy intensive and low energy intensive groups, as well as industries in general. Findings of the study show that the estimated coefficient of dynamic adjustment rate or error correction coefficient in the end use of oil derivatives was at its highest and in electricity was at its lowest. All the three energy carriers had almost always low price elasticity. Capital intensive coefficient had positive impact on efficiency whereas it showed a negative impact on the use of natural gas.