In Iran the mainstreaming tool for integrating environmental concerns into energy sector is an Energy-Environment Review (EER-Iran). This paper comprises: (i) an analysis of the current situation with regards to energy production and consumption; (ii) an evaluation of the growth prospects with regard to energy production and consumption; (iii) the identification of environmental issues induced by the generation and use of energy and estimation of the costs of damages; (iv) the evaluation of the extent of contribution to the climate-change phenomenon through emission of greenhouse gases; (v) the evaluation of the proposed mitigation measures for the previously identified environmental problems; and (vi) conclusions and recommendations. The EER-Iran assessed the total health damage from air pollution in 2001 at about US $ 7 billion; equivalent to 8.4% of nominal GDP. In the absence of the price reform and control policies, the EER estimated that the damage in Iran will grow to US $ 9 billion by 2019, in the money of 2001. This is equivalent to 10.9% of nominal GDP, i.e. a large percentage of a larger GDP. Of this total, US $ 8.4 billion come from transport sector. The damage cost to the global environment from the flaring of natural gas assessed on the basis of a carbon price of US $ 10/ton CO2 and found to be approximately US $ 600 million per year.