Iran at a Crossroad: Balancing Economic and Environmental Pressures

Although it remains an issue of contentious debate, the Iran Nuclear Deal has been widely regarded as a necessary step to ensure international security and nuclear nonproliferation. However, the implications of the deal go far beyond curtailing Iran’s nuclear program. It has already impacted the global crude oil market as Iran’s fight to regain its pre-sanctions market share has depreciated low oil prices even further. A less discernible, but equally important, consequence of the deal is the environmental impact. Iran now faces two conflicting pressures: a need to revive and grow its economy through crude oil exports and the pressure to become a more environmentally sustainable nation. Ultimately, if Iranian officials are able to balance these two pressures the deal could prove to be a critical step towards a cleaner and more sustainable future in Iran.

        The sanctions imposed on Iran took an incredible toll on the health of the national economy. It is estimated that GDP shrank by around 9% under sanctions and oil exports decreased from 2.6 million barrels a day in 2011 to 1.4 million barrels a day in 2014. Now that the sanctions have been lifted Iran has the opportunity to revive its economy. However this potential is complicated by the fact that oil prices have dropped substantially in recent years as supply outpaces demand. Other nations with oil-based economies have pushed to freeze production in order to increase prices, but Iran has continuously refused to comply with this initiative. Despite the low prices Iran remains intent on regaining, or even surpassing, its pre-sanction market share with aims to raise productive capacity to 5.7 million barrels a day by 2020.

        In addition to the adverse economic effects, the sanctions also contributed to major environmental crises in Iran that must now be addressed. By cutting off access to essential imported resources, Iran was forced to adopt “survivalist” means of overcoming shortages at the expense of environmental considerations. Unable to import refined oil, Iran developed its own oil refineries that produced petrol with ten times the contaminants of imported fuel. The use of contaminated petrol has contributed to dangerous levels of air pollution in many cities- the city of Zarbol in Iran is currently the most polluted city in the world. Furthermore, Iran was forced to expand water resource infrastructure, which depleted their already scarce natural reserves of groundwater and dried up vital rivers and lakes. Now that the sanctions have been lifted Iran has regained access to cleaner fuel, however the dire conditions will not dissipate without a concerted effort from the government.

        In addition to the environmental degradation indirectly caused by the sanctions, Iran is particularly vulnerable to the effects of climate change. Iran is already susceptible to high temperatures, desertification and drought; climate change has exacerbated these issues further. During the 2015 Paris Conference Iranian officials acknowledged the need to address climate change, but only pledged a 4% reduction in greenhouse gas emission by 2030 (or 12% contingent on $35 billion in international support). Even a reduction of this amount will be challenging due to Iran’s conflicting goal to drastically expand oil production within the next few decades.

        A possible solution to Iran’s environmental and economic ailments is for the country to shift away from a reliance on oil in favor of more renewable energies. Without sanctions, Iran now has access to the foreign capital and technological assistance necessary to make alternative energy a viable economic solution. Furthermore, the cost of producing wind and solar energy is steadily declining, making it an opportune time for Iran to amp up its investments and distinguish itself as a global power in alternative energies and keep up with other nations in the region, such as Saudi Arabia, that have already invested in alternative energy. Its location along several major wind corridors and large regions in the northwest and southeast that receive 300 days of sun per year make Iran uniquely suited to harness enormous amounts of wind and solar energy.

The Iranian government has recognized alternative energies as a promising new industry and has created compelling incentives to attract foreign investors, such as guaranteed government purchases for 20 years. In particular private investors in Western nations, such as Germany, Spain, Denmark and Italy, have already expressed interest in cooperating with Iran to develop renewable energy. The Iranian power developer, Sunir, and the Spanish company, Bester, have entered into a partnership to design and construct infrastructure with the intention of significantly expanding the country’s solar energy potential by 2020. Partnerships such as this will be crucial to the success of renewable energy development in Iran. The sector is still in its infancy, and although Iran has enormous natural potential and a skilled workforce, it currently lacks the capital and expertise to expand renewable energy production on a grand scale.

        Iran now finds itself at a crossroad. While the increased production of oil will no doubt provide much needed respite for the crippled Iranian economy, officials and policymakers must heavily consider the fact that a strong oil industry may only be economically beneficial in the short term. The global push to mitigate climate change and shift to alternative energies suggests that demand- and consequently the price- for oil will follow a downward trend in the long term. By distinguishing themselves as leaders in alternative energy early on, Iran will not only secure themselves a more prosperous economic future, but also a cleaner and more environmentally sustainable future.

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