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This article analyzes the welfare loss of pollution resulting from production in Iranian economy using an augmented growth model and designing an economic-ecological system dynamics model. The main elements of the model include social welfare, welfare loss, production, physical and human capital accumulation, pollution accumulation, income distribution, and initial conditions. Regarding 2005 as a base year, the time path of per capita pollution and related welfare loss are simulated for the Iranian economy over the 20-year time horizon. The simulation results indicate that with persistence of the status quo, per capita pollution and its welfare loss rise with positive rate. Therefore, the goals of sustainable development will not be achievable. Hence, further improvement of the environment requires government intervention through the appropriate policies. The results of sensitivity analysis of policy parameters show that clean technology diffusion and environmental preferences of producers have negative effects on pollution emissions per capita and economic welfare in Iran, while strengthening environmental preferences of consumers may raise the social welfare loss of pollution. In addition, pollution per capita and its welfare loss are of most sensitivity to environmental preferences of producers, environmental preferences of consumers and clean technology diffusion, respectively. Policy-makers may regard these results in planning to achieve sustainable development objectives.  

Keywords: economic growth, Pollution, Damage Welfare, System Dynamics, Iran

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