Assessing Provincial Energy Efficiency Considering the Social Cost of Greenhouse Gases: A Three-Level Meta-Frontier Approach for Iran

Articles in Press

Document Type : Research Paper

Authors

1 PhD student in Economics, Tarbiat Modares University, Tehran, Iran

2 Associate Professor, Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran

10.22034/ecoj.2026.70352.3479

Abstract

This study applies a three-level meta-frontier framework based on the SBM–VRS model to measure energy efficiency and decompose its sources of inefficiency across Iran’s 31 provinces in 2021 (Iranian year 1400). Capital stock, labour, and energy consumption measured in barrels of oil equivalent are treated as inputs; gross provincial product is specified as the desirable output; and the social costs of carbon dioxide, methane, and nitrous oxide emissions are incorporated as a single undesirable output. Provincial energy efficiency is evaluated relative to three nested frontiers: the climate–sector frontier, the sectoral frontier, and the national meta-frontier. Total energy inefficiency is subsequently decomposed into managerial, climatic–regional, and technological–structural components. The results show that average energy efficiency declines from 0.926 at the climate–sector frontier to 0.742 at the sectoral frontier and 0.460 at the national meta-frontier. Only seven provinces—Ilam, Bushehr, Tehran, South Khorasan, North Khorasan, Khuzestan, and Kohgiluyeh and Boyer-Ahmad—are efficient at all three levels. The national technical energy-saving potential is estimated at approximately 885.5 million barrels of oil equivalent. Of this potential, 13.0% is attributable to managerial inefficiency, 46.3% to the climatic–regional component, and 40.7% to the technological–structural component. These findings indicate that most of the potential efficiency improvement is associated with gaps between regional and technological frontiers rather than managerial performance alone. Therefore, uniform provincial targets should be avoided, and energy-efficiency policies should combine improved demand management with region-specific infrastructure development and technological and structural upgrading.

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Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 13 September 2026

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