Hamid Mollazadeh
Energy scarcity and price volatility dominate headlines, but an equally damaging problem goes largely unreported: poor energy efficiency. In Iran—like in many emerging economies—the real crisis is not only how much fuel the country produces but how wastefully it is used.
The consequences are economic, environmental and strategic: lost investment, higher import pressures, increased pollution and forgone growth opportunities.
Compared with global averages, Iran’s energy intensity—the amount of energy used per unit of economic output—is widely regarded as high. Years of subsidized energy prices, aging infrastructure and weak enforcement of efficiency standards have encouraged wasteful consumption in buildings, transport and industry.
Residential and commercial buildings leak heat in winter and lose cooling in summer; outdated boilers, pumps and insulation translate into higher bills and heavier loads on the power grid.
In transport, a road-dependent freight system, old heavy vehicles and inefficient driving practices push diesel and gasoline demand upward. In industry, legacy plants and low investment in modern process controls keep energy productivity well below best-practice levels.
Substantial Cost
The economic cost is substantial. Inefficiencies translate directly into higher operating costs for manufacturers, larger fuel subsidies on government budgets and reduced competitiveness for exports.
For households, wasted energy is equivalent to a recurring tax on living standards. If businesses must spend more on energy, they invest less in technology, wages or expansion—a drag on private-sector dynamism and jobs.
Fortunately, the upside from tackling inefficiency is large and relatively fast. International experience shows that targeted reforms can deliver double-digit reductions in consumption within a few years.
Typical packaged measures—building retrofits (insulation, efficient glazing, modern HVAC), tighter appliance and equipment standards, industrial process upgrades, smart metering and demand-side management—often yield payback periods of under five years.
Economists and energy experts commonly estimate that well-designed efficiency programs can cut national energy use by 15–30% over a decade, depending on the starting point and policy ambition.
Practical precedents exist. Turkey implemented energy efficiency laws and incentive schemes that mobilized private investment in retrofit projects and industrial upgrades, trimming energy intensity while boosting industrial competitiveness.
China has run extensive programs to replace inefficient boilers, modernize industrial processes and enforce building codes, saving large quantities of coal and gas while improving air quality in major cities.
Both countries paired regulation with financial support mechanisms—loans, tax incentives, and performance contracting—to unlock private capital.
Path Forward
For Iran, the path forward requires three parallel moves. First, rationalize pricing and targeted subsidy reform to create incentives for conservation while protecting vulnerable households. Second, deploy practical, scalable programs: mandatory efficiency standards for appliances and buildings, large-scale public building retrofits, industrial energy audits and support for modern motors and control systems. Third, open financing channels—energy performance contracts, green bonds, concessional loans and guarantees—to attract private investment at scale.
Ignoring inefficiency is no longer an option. In a constrained fiscal and environmental context, energy efficiency is not just a technical fix; it is a high-return economic strategy.
Addressing the silent crisis would free resources, reduce pollution and strengthen Iran’s energy resilience—outcomes that money alone cannot buy, but smart policy and focused investment can deliver.
