Assessing the Effects of Productivity and Pricing Policies on Water, Energy, and Food Security in Iran: A Nexus Approach Based on a Computable General Equilibrium Model

Document Type : RESEARCH PAPER

Authors

1 Ph.D. Candidate, of Economics, University Tabriz, East Azerbaijan, Iran.

2 Professor of Economics, University of Tabriz, East Azerbaijan, Iran

Abstract

Water, energy, and food (WEF) security constitute major macroeconomic and environmental challenges for Iran. Addressing these challenges within a sustainable development context requires a systemic nexus perspective that explicitly models cross-sectoral interdependencies. Accordingly, this study employs a WEF nexus framework to identify the inherent synergies and trade-offs that shape resource management across these sectors. Using a Computable General Equilibrium (CGE) model calibrated to Iran’s Social Accounting Matrix (SAM), the research evaluates economy-wide effects of two contrasting policy strategies: productivity‑enhancing measures and price‑based policies, including subsidy removal and taxation. Simulations reveal that productivity-driven policies consistently generate macroeconomic dividends, improving aggregate social welfare and reinforcing security across all three WEF dimensions. These benefits are maximized when interventions are implemented as cohesive, prioritized policy packages. Specifically, enhancing energy productivity exerts the most robust positive impact compared to water or food interventions, while a bundled energy–food productivity scenario yields the highest overall efficiency gains. Conversely, relying exclusively on pricing instruments triggers widespread negative macroeconomic spillovers and diminishes public welfare. Within the price scenarios, escalating food prices precipitously degrade food security, and energy price hikes induce severe systemic shocks across the entire economic network. Interestingly, water price increases yield largely neutral systemic effects.
Ultimately, the findings demonstrate that unilateral pricing policies create unsustainable socio-economic frictions. To mitigate these inherent trade-offs, policymakers must design hybrid strategies that structurally integrate price reforms with targeted productivity enhancements, thereby fostering positive nexus synergies and safeguarding Iran’s sustainable development trajectory. Given the static nature of the model, the simulation results are applicable exclusively to short- and medium-term equilibrium adjustments.

Keywords

Main Subjects

References

Abedi, H., Shahbazitabar, M., & Mohammadi-Ivatloo, B. (2020). Food, energy and water nexus: A brief review of definitions, research, and challenges. Inventions, 5(4), 56. Doi:10.3390/inventions5040056 [in Persian]
Allan, G., Hanley, N., McGregor, P., Swales, K., & Turner, K. (2007). The impact of increased efficiency in the industrial use of energy: a computable general equilibrium analysis for the United Kingdom. Energy Economics, 29(4), 779-798. https://doi.org/10.1016/j.eneco.2006.12.006
Arrow, K. J., Chenery, H. B., Minhas, B. S., & Solow, R. M. (1961). Capital-labor substitution and economic efficiency. Review of Economics and Statistics, 43(3), 225–250.
Azar, B., Ranjpour, R., Tekanlu, K., Motakker Azad, M., Asadzadeh, A., & Ahmad, A. (2017). Estimating and comparing food security status and the impact of economic variables on it in Iran’s provinces. Quarterly Journal of Applied Theories of Economics, 3, 47–76. [IN PERSIAN]
Bardazzi, E., & Bosello, F. (2021). Critical Reflections on Water-Energy-Food Nexus in Computable General Equilibrium Models: A Systematic Literature Review. Environmental modelling & software, 145(105201. Doi: 10.1016/j.envsoft.2021.105201
Bardazzi, E., Gabriele, S., Francesco, B., & and Key Hernández, R. E. (2024). Toward the full implementation of the water-energy-food nexus in computable general equilibrium modelling: methods and macroeconomic implications. Economic Systems Research, 36(3), 422-450. Doi:10.1080/09535314.2024.2349881
Bazilian, M., Rogner, H., Howells, M., Hermann, S., Arent, D., Gielen, D., Steduto, P., Ridder, P., Ofholzer, K., D’Angelo, A., & Koutroulis, A. (2011). Considering the energy, water and food nexus: Towards an integrated modelling approach. Energy Policy, 39(12), 7896–7906. Doi: 10.1016/j.enpol.2011.08.015
Blackorby, C., Primont, D., & Russell, R. R. (1978). Duality, Separability, and Functional Structure: Theory and Economic Applications. North-Holland.
Breisinger, C., Mukashov, A., Raouf, M., & Wiebelt, M. (2018). Phasing out energy subsidies as part of Egypt economic reform program: Impacts and policy implications: International Food Policy Research Institute (IFPRI (.
Berrittella, M., et al. (2007). "The economic impact of restricted water supply: A computable general equilibrium analysis." Water Research 41(8)
Burniaux, J.-M. and T. Truong (2002). GTAP-E: An Energy-Environmental Version of the GTAP Model. Department of Agricultural Economics, Purdue University, West Lafayette, IN, Global Trade Analysis Project
Calzadilla, A., Rehdanz, K., & Tol, R. (2011). Water scarcity and the impact of improved irrigation management: A computable general equilibrium analysis. Agricultural Economics, 42(305-323. Doi:10.1111/j.1574-0862.2010. 00516.x
Daher, B. T., & Mohtar, R. H. (2015). Water–energy–food (WEF) Nexus Tool 2.0: guiding integrative resource planning and decision-making. Water International, 40(5-6), 748-771.
Di Martino, M., et al. (2023). "A comprehensive classification of food–energy–water nexus optimization studies: State of the art." Journal of Cleaner Production 420: 138293.
Dudu, Hasan & Chumi, Sinqobile, 2008. "Economics of irrigation water management: a literature survey with focus on partial and general equilibrium models," Policy Research Working Paper Series 4556, The World Bank.
Fan, J.-L., Kong, L.-S., & Zhang, X. (2018). Synergetic effects of water and climate policy on energy-water nexus in China: A computable general equilibrium analysis. Energy policy, C), 308-317. https://doi.org/10.1016/j.enpol.2018.09.002
FAO. (2014). The water-energy-food nexus: A new approach in support of food security and sustainable agriculture.
Galdeano-Gómez, E., Aznar-Sánchez, J. A., Pérez-Mesa, J. C., & Piedra-Muñoz, L. (2017). Exploring synergies among agricultural sustainability dimensions: An empirical study on farming system in Almería (Southeast Spain). Ecological Economics, 140(99-109.
Gao, Z., Zhao, Y., Li, L., & Hao, Y. (2024). Economic effects of sustainable energy technology progress under carbon reduction targets: An analysis based on a dynamic multi-regional CGE model. Applied Energy, C), Doi: 10.1016/j.apenergy.2024.123071.
 Ghosh, B., Gubareva, M., Ghosh, A., Paparas, D., & Vo, X. V. (2024). Food, energy, and water nexus: A study on interconnectedness and trade-offs. Energy Economics, 133(C), S0140988324002299.
Hoff H, Alrahaife SA, El Hajj R, Lohr K, Mengoub FE, Farajalla N, Fritzsche K, Jobbins G, Özerol G, Schultz R and Ulrich A (2019) A Nexus Approach for the MENA Region—From Concept to Knowledge to Action. Front. Environ. Sci. 7:48. doi: 10.3389/fenvs.2019.00048
Howells, M., Hermann, S., Welsch, M., Bazilian, M., Engström, R., Alfstad, T.,. Ramma, I. (2013). Integrated analysis of climate change, land-use, energy and water strategies. Nature Climate Change, doi.org/10.1038/NCLIMATE1789
Hosseini, M. (2013). Analysis of the effects of water subsidy reduction in Iran’s economy (Using computable general equilibrium dynamic model) [Doctoral dissertation, University of Sistan and Baluchesta]. In Persian]
Huang, D., Li, G., Sun, C., & Liu, Q. (2020). Exploring interactions in the local water-energy-food nexus (WEF-Nexus) using a simultaneous equations model. Science of The Total Environment, 703(135034.
Kiani, S. (2018). Investigating the effect of variability and climate change on water resources, food security and economic welfare of Iran [Doctoral dissertation, University of Sistan and Baluchestan. [In Persian]
Kiani Deh Kiani, M. (2022). Investigating the distributional effects of increasing water, food and energy prices in the economic system [In Persian]. Agricultural Economics and Development, 30(3), 207–236.
Kheyabani, N. (2016). A dynamic computable general equilibrium model for evaluating the effects of energy policies on the Iranian economy. Iranian Economic Research, 21(69), 1–463. [In Persian]
 Koesler, S., Swales, K., & Turner, K. (2014). International spillover and rebound effects from increased energy efficiency… Energy Economics, 54, 444-452.
Liu, J., Hull, V., Godfray, H. C. J., Tilman, D., Gleick, P., Hoff, H., . Sun, J. (2018). Nexus approaches to global sustainable development. Nature Sustainability, 1(9), 466-476.
Liu, Y., & Vu, K. (2017). Energy efficiency, energy prices, and economic growth: Evidence from OECD countries. Energy Economics, 67, 246-257
Martinez-Hernandez, E., Leach, M., & Yang, A. (2017). Understanding water-energy-food and ecosystem interactions using the nexus simulation tool NexSym. Applied Energy, 206(1009-1021.
Mazandarani Zadeh, H., & Shokouhi Far, Y. (2023). Determining the shadow price of water using a chance-constrained fuzzy programming model, case study: Qazvin Irrigation Network. Water Management in Agriculture, 10(1), 147-158. [in Persian].
Nematollahi, Z., Shahnavesh, N., & Javanbakht, A. (2015). The impact of increasing energy carrier prices on food security (Application of computable general equilibrium model) [IN PERSIAN]. Iranian Journal of Agricultural Economics Research, 7(3), 181–201.
Ozturk, I. (2015). Sustainability in the food-energy-water nexus: Evidence from BRICS (Brazil, the Russian Federation, India, China, and South Africa) countries. Energy, 93(999-1010.
Perman, R., Ma, Y., Common, M., Maddison, D., & Mcgilvray, J. (2013). Natural Resource and Environmental Economics: Pearson Education.
Ranjpour, R., Karimi, Z., Bagherzadeh, F., Mottakker Azad, M. A., & Asadzadeh, A. (2018). Food security status and the impact of economic variables on it in Iran. Quarterly Journal of Applied Theories of Economics, 5(4), 47–76. [In Persian]
Rasekhi, S., Shakeri Maab, S., Zaroki, Sh., & Salmanpour Ahmadi, A. (2024). Shadow price of water and competitiveness of the agricultural sector approach. Quarterly Journal of Applied Economic Studies of Iran, 13(52), 135-174. https://doi.org/10.22084/aes.2024.29672.3709 [in Persian]
Scott, C. A., Kurian, M., & Wescoat, J. L. (2015). The water-energy-food nexus: Enhancing adaptive capacity to complex global challenges Governing the nexus (pp. 15-38): Springer.
Solaymani, S., & Kari, F. (2014). Energy policy, C), 115-125. Doi: 10.1016/j.enpol.2014.03.035. [in Persian]
Tahami Pour Zarandi, M., Khazaei, A., & Koulivand, F. (2020). Analysis of the tariff system and economic value of water in Iran's industrial sector. Water and Sustainable Development, 6(3), 1930. https://doi.org/10.22067/jwsd.v6i3.76788. [in Persian]
Vats, G., Sharma, D., & Sandu, S. (2021). A flexible input-output price model for assessment of a nexus perspective to energy, water, food security policymaking. Renewable and Sustainable Energy Transition, 1(100012.
Yang, Z., Liu, G., Guo, Y., Liang, S., & Zhang, L. (2026). Environmental nexus paradigm: Toward a unified framework for sustainable governance. EnvironmentalNexus,1(1),100008. doi.org/10.1016/j.enex.2026.100008
Yang, Y., Cui, Q., & Wang, H. (2024). Applied Energy, C), Doi: 10.1016/j.apenergy.2024.12315
Yousefi, A., Khalilian, S., & Bolali, H. (2011). Investigating the strategic importance of water resources in Iran’s economy using the general equilibrium model [In Persian]. Journal of Economics and Economic Development, 25(15), 109–120.
Yuan, M.-H., & Lo, S.-L. (2020). Developing indicators for the monitoring of the sustainability of food, energy, and water. Renewable and Sustainable Energy Reviews, 119(109565.
Yuan, Y., Yang, X., Yuan, J., & Zhang, H. (2025). Renewable and Sustainable Energy Reviews, C), Doi: 10.1016/j.rser.2025.115873
Zhang, Q. Tan, and Y. Cai, “General equilibrium analysis of carbon tax policy on water-energy-food nexus efficiency,” Energy, vol. 304, pp. 132079, 2024/09/30/, 2024.
Stable Economy Journal
Volume 7, Issue 3 - Serial Number 24
October 2026
Pages 109-147

Files

Share

How to cite

Statistics