Studying the Impact of Trade Liberalization Policy on Energy Balance in Shanghai Cooperation Organization Member Countries (Regional Computable General Equilibrium Model Approach)

Authors
Hamid Ghasemian
Abdolhamid Moarefi Mohammadi
MohammadReza Heidari Khorasgani
Alimorad Sharifi
Abstract
Introduction

The growing energy imbalances in the country, which are caused by the higher growth rate of demand and consumption than supply and production, have made the need for planning to solve energy problems more evident than ever before. Undoubtedly, the continuation of the increasing trend of energy imbalances in the country's key carriers will cause economic, social and security effects and consequences. On the other hand, according to economic theories, trade liberalization increases efficiency, economies of scale, improves competition, improves the productivity of production factors and increases trade flows, and ultimately leads to economic growth. On the other hand, the Shanghai Cooperation Organization has great capacities in the energy sector (with about a quarter of the world's population, it controls 23% of oil, 55% of natural gas and 35% of the world's coal). Undoubtedly, the accession of observer countries, especially Iran, will increase the potential and capacities of this organization. Therefore, in this study, the impact of trade tariff reduction between Iran and the Shanghai Cooperation Organization on the balance of various energy types in Iran was scenario-based.



Method

No study has analyzed the impact of trade liberalization policy between the Shanghai Cooperation Organization member countries on the energy balance in Iran, and this study addresses this issue by using the computable general equilibrium (CGE) model. Also, among the computable general equilibrium models, the multi-regional general equilibrium model is specifically designed for analyzing world trade and can conduct research and studies on the international flow of goods and services and factors of production in a dynamic and static manner. Using a multi-regional general equilibrium model instead of a single-regional general equilibrium model has several advantages. One of the strengths of these models is their ability to help understand the relationship between sectors, countries, and factors of production on a global scale. Among the multi-regional general equilibrium models, the Energy-Based World Trade Analysis Project model provides diverse possibilities for world trade and energy-related research.

This study examines the impact of reducing trade tariffs between Iran and the Shanghai Cooperation Organization under scenarios of -25%, -50% and -100% on the balance of various energy sources in Iran, including crude oil and petroleum products, natural gas, coal and electricity. For this purpose, the necessary data were extracted from the Global Trade Analysis Project for Energy-Based (GTAP-E) version 10 database, which includes the Social Accounting Matrix (SAM) of 141 countries or regions and 65 sectors. Finally, the data were analyzed using MATLAB software.



Results and Discussion

The results showed that reducing trade tariffs between Iran and other member countries of the Shanghai Cooperation Organization, on the one hand, due to the ease of exporting energy carriers (especially crude oil and petroleum products) and on the other hand, due to the increased use of fossil energy exploration, production, and distribution technologies (especially crude oil and petroleum products, natural gas, and coal), leads to a decrease in fossil energy consumption and an increase in the net balance of fossil energy in Iran. In addition, the reduction of trade tariffs between Iran and other member states of the Shanghai Cooperation Organization, due to the possibility of increasing imports of goods and equipment that consume less energy needed in various domestic, industrial (light and heavy industries), transportation and agricultural sectors (tractors, combines, etc.), as well as increasing cooperation in the development of renewable energy technologies, will lead to an increase in the consumption of renewable energies and a decrease in the consumption of the energy carriers under consideration (especially electricity), and ultimately an increase in their net energy balance in Iran.
Keywords
Energy balance
Shanghai Cooperation Organization
Trade tariff elimination
Regional general equilibrium model
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