Analyzing the Role of Energy in the Iranian Agricultural Sector

During last four decades, growth of energy use in the Iranian agricultural sector has exceeded its production growth. Energy subsidy is believed to be one of the reasons. Because of the high financial burden of energy subsidy for the government, it is necessary to reconsider the energy use pattern. The objective of this study is to analyze the role of energy in the agricultural sector. The applied concepts are production function, causality and changes in energy intensity. Dataset used were time series covering 1353-84 (1974-2005) periods. Results of the production function estimate showed significant impact of energy on agricultural production and 10 percent increase in energy use was expected to increase agriculture production by 4.1 percent. It was also found that energy consumption had a positive impact on various subsectors (except forestry) value added but the reverse relation was not confirmed. The findings also showed that decrease in real price of energy caused an increase in energy intensity, however, technology progress and substitution of capital and labor may decrease the energy intensity.