Conference Paper
Price Elasticity of Residential Natural Gas: Evidence from Billing Data in Iran
No.
ERF_31_EN179
Publisher
ERF
Date
March, 2025
Topic
Q5. Environmental Economics
This study investigates the price elasticity of residential natural gas demand in Iran, utilizing a comprehensive nationwide database of household billing records from 2010 to 2017. To address key methodological challenges in energy demand estimation, the analysis applies instrumental variables (IV) and simulated IV techniques to account for price endogeneity caused by increasing block pricing structures and internal validity of findings. The results reveal substantial heterogeneity in price elasticity, ranging from -0.23 in winter to -0.51 in summer, irrespective of consumption tiers, and from -0.42 for the first pricing tier to -0.55 for the 12th tier over the entire year. These findings highlight the seasonal and consumption-level variability in consumer responsiveness to price signals. The results remain robust across various estimation methods, providing valuable insights into the dynamics of pricing policies and their effects on demand behavior. This study offers practical implications for policymakers aiming to balance energy provision, environmental sustainability, and economic equity in managing natural gas resources.
Authors
Mohammad Mahdi Jafari
Ph.D. candidate in Economics, Sharif University of...
Research Fellows
GholamReza K. Haddad
Associate Professor of Economics, Graduate School of...