The urgent need to combat climate change and reduce greenhouse gas emissions underscores the importance of transitioning to renewable energy as a sustainable alternative to fossil‐fuel‐based electricity. This study evaluates a novel financing mechanism for renewable electricity in Iran that leverages profits from the petrochemical industry and carbon tax revenues to support a feed‐in tariff (FIT) model. By reallocating natural gas from inefficient fossil‐fuel power generation to high‐value petrochemical production, the approach enhances economic value, reduces CO₂ emissions, and promotes renewable energy deployment. Iran plans to expand its petrochemical production from 91.5 million tons in 2022 to 183 million tons by 2033, which will drive a 166% increase in demand for fuel and feedstock. Given these resource constraints, integrating renewable electricity into the grid is critical for sustaining industrial growth. System dynamics modeling indicates that carbon tax revenues could reach between $3.8 billion and $37.7 billion by 2033. Meanwhile, the profitability of the petrochemical sector shows wide variability depending on product prices, with a 326% spread between optimistic and pessimistic scenarios. The resulting FIT ranges from 6.24 to 20.29 cents per kilowatt‐hour, with higher carbon taxes being particularly beneficial under low‐price scenarios. This study presents a sustainable, market‐aligned strategy for renewable energy financing that can enhance economic resilience and environmental performance in fossil‐rich nations.
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Aghababaei et al. (2025) studied this question.
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