65 fund—financed by a levy on palm oil exports, “public funds,” and other “legitimate” sources. The fund will be used to pay for the biodiesel unit subsidy, which is the difference between the benchmark procurement cost of biodiesel and the regulated price of diesel.

# **Islamic Republic of Iran**

The Iranian government’s passage of the Targeted Subsidies Reform Act in 2010 was a bold move. The Act aimed to raise the prices of fuels, water, bread, rice, cooking oil, milk, sugar, postal services, and airfare to close to cost‐reflective or international levels in five years. In exchange, half of the subsidy savings would be used to provide cash transfers to the affected households, 30 percent to provide grants to agricultural and industrial enterprises, and 20 percent to cover administrative costs. With respect to fuels, the Act called for gradually increasing fuel prices to no less than 90 percent of the Persian Gulf FOB prices between 2010 and 2015, and similarly increasing natural gas tariffs to 75 percent of export‐parity prices and power tariffs to cost‐recovery levels. The Reform Act established the Targeted Subsidies Organization to oversee the implementation of the reform measures.

The Act was passed by the parliament in January 2010 to go into effect in March 2010, but several concerns delayed the start of its implementation: (1) high inflation from price increases, (2) conversion of the local currency to gold and foreign currencies in response to high domestic inflation by those fearing currency depreciation, (3) adverse effects on the Tehran Stock Exchange, (4) widespread bankruptcies of energy‐intensive firms, and (5) public opposition and protests. Seven months later on October 15, 2010, the president announced the start of the subsidy reform and informed the public that Rls 810,000 (US$80) would be deposited in the bank accounts of all registered individuals in the first two months, which could be withdrawn only after the price increases. To prevent hoarding and manage inflationary expectations, the date of price increases was not announced.

With no prior notice, and after securing 800 main checkpoints and major sites, the president announced the start of the reform program in a 10 pm television address on December 18, 2010. The address did not spell out the goods affected or the size of price increases, but conveyed the government’s decision to pay an additional Rls 10,000 (US$1) a month to each individual to offset the bread price increase, allow withdrawals of cash transfers previously made, and eventually double the monthly payments. In so doing, the government abandoned the original plan to target cash transfers to households based on income, size, and the place of residence, and to limit the number of eligible recipients per family, despite the government’s possessing millions of financial questionnaires completed by respondents. Instead, the government decided to give uniform cash transfers to all individuals. By mid‐November 2010, 62.5 million out of the total population of 75 million had reportedly received cash transfers. Eventually 72.5 million are reported to have registered for cash transfers.

Oil price increases were announced on the next day. With the exception of government vehicles and those used mostly in agriculture and industry running on regular gasoline, the price increases were at least double and as high as 21‐fold. There was no official explanation for how these increases had been arrived at. On the same day, the state radio and television stations steadfastly reported widespread and enthusiastic public acceptance of the subsidy reform program implementation. There were no mass protests. A poll conducted by the parliament’s research center in March 2011 showed that some 42