Pathways to deep decarbonization in Iran’s power sector: Integrating renewable energy expansion and electricity subsidy reform

Achieving deep decarbonization in fossil-dependent economies requires a coordinated strategy that combines technological transformation with ambitious policy reform. Iran’s electricity sector, which accounts for nearly one-third of national CO₂ emissions, provides an important case for examining such transitions. This study develops an integrated modeling approach that couples the Model for Energy Supply Strategy Alternatives and their General Environmental Impact (MESSAGE) energy system model with an Autoregressive Distributed Lag (ARDL) demand model to explore decarbonization pathways for 2024–2050. The framework jointly evaluates (i) provincial-level renewable energy expansion and (ii) progressive electricity subsidy reform shaping demand growth. Results show that gradual subsidy removal could reduce cumulative electricity demand by approximately 10% by 2050, thereby easing the scale of required capacity expansion. MESSAGE simulations indicate that renewable capacity could increase from 8% of total installed capacity in 2024 to about 78% by 2050, leading to a 53% reduction in powersector CO₂ emissions relative to 2024 levels. However, the results also suggest that nearterm decarbonization remains challenging, with emissions likely to increase before 2030 due to continued demand growth and the inertia of existing generation infrastructure. The findings show that combining demand-side reform with regionally optimized renewable deployment is essential for Iran to align with the Paris Agreement and to put the power sector on a credible carbon-neutral pathway. However, fully eliminating residual emissions would still require additional measures such as carbon capture and storage (CCS), nature-based removal, or cross-sectoral offset mechanisms.