Objectives: This paper estimates the energy demand systems in transportation and housing sectors in Iran over the period 1997-2006. Then, ignoring energy subsidies, calculates the changes in social welfare.

  Method: This paper uses Almost Ideal Demand System (AIDS) and

  compensating variation (CV) for estimating the energy demand systems and calculating the changes in social welfare in terms of ignoring energy subsidies and increasing energy prices up to the level of international prices (shadow prices) respectively.

  Findings: The share of energy expenditures from total expenditures in

  transportation sector for middle deciles is higher and for richer deciles is less than other deciles. In housing sector, whenever the level of welfare increases, this share decreases.