This paper provides an ex post evaluation of Iran's energy subsidy reform of main law, definitions, its aims and scope, its effectiveness, and problems. Based on an assessment of policy reports, actual data, peer-reviewed studies, and regression models, this study suggests evidence that the removal of energy subsidies in Iran was effective in reducing energy consumption and greenhouse gas emissions only in the first 2 years of policy implementation. But, over the next years, the demand for energy commodities increased because of the incomplete implementation of the policy. Besides some local and international economic, social, and political challenges, the policy was not completed in the subsequent years because the government did not prepare its preliminary theoretical framework and requirements in the three stages of legislation and transparency – implementation and management, control, and adjustment of the negative policy impacts. Moreover, the decline in environmental emissions occurred mainly due to fuel switching, as natural gas consumption in power plants, industries, and transport, and rather the use of renewable energies, increased substantially. Likewise, at the time of removal of energy subsidies, the government introduced a cash transfer scheme until the present. This compensation scheme has had significant burdens on the government budget and reaches the trillions of rials each year, while in the first year of the policy, it improved the socioeconomic welfare. The econometric results showed that removing energy subsidies is an effective policy in reducing energy consumption and CO2 emissions in Iran. This study provides important policy recommendations for sustainable energy security and economic development in Iran. © 2021 Society of Chemical Industry and John Wiley & Sons, Ltd.
