The Impact of Renewable Energy on Industrial Growth in Iran through Productivity

Document Type : applicative

Authors

1 Faculty Member of Economics and Political Science, Shahid B eheshti University

2 Economics

3 Shahid Beheshti University, Evin, Tehran, Iran

10.30473/jier.2026.77485.1532

Abstract

Inrecent years, the intensification of environmental challenges and the limitations of
fossil energy resources have increased attention to renewable energy. In Iran’s economy,
the industrial sector plays a key role in economic growth due to its significant share in
production and employment and its substantial dependence on energy. The aim of this
study is to examine the effect of renewable energy consumption on the industrial growth
of Iran’s industries through the channel of total factor productivity (TFP). To this end,
using panel data for Iranian industries over the period 2002–2021, a system of
simultaneous equations—including a total factor productivity equation and an industrial
value-added equation—has been estimated using the Generalized Method of Moments
(GMM). The models account for the distinction between renewable and non-renewable
energy, energy intensity, and other main inputs of production. The results show that
energy intensity has a negative and statistically significant effect on total factor
productivity, indicating inefficiency in the pattern of energy consumption in the
industrial sector. Renewable energy consumption has a positive but statistically
insignificant effect, which may be attributed to the limited share of these resources and
the nascent stage of related technologies. Total factor productivity has a positive and
statistically significant effect on industrial value added, and the roles of labor and raw
materials in explaining changes in value added are greater than that of capital stock.
Overall, the impact of renewable energy on Iran’s industrial growth can mainly be
explained through the channel of total factor productivity,

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History

  • Receive Date: 18 February 2026
  • Revise Date: 26 May 2026
  • Accept Date: 01 July 2026

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