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Economic development is one of the major policies of a country which is concerned to industry and technology on one hand and leads to environmental pollution on the other hand. The experiences of developed countries show that economic development with emphasis on the industry sector, without any attention to environment, can create serious problem against sustainable development. Industrialization has caused increasing energy consumption and therefore air pollution. It's so important to consider the relationship between industrial activities and industrial pollution in developing countries, because industry sector has a basic role in development process of these countries. Therefore the aim of this study is examining and qualifying of linkage between industrial activity and air pollution, using an industry-level dataset of IRAN manufacturing industries during the period 1995-2007. The result of study shows that air pollution is a positive function of energy consumption, industrial activity and physical capital intensity and also is a negative function of labor productivity, fuel price and human skill intensity.

Keywords: Energy Consumption, Panel Data, Iran Manufacturing Industries, Air pollution

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