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ABSTRACT The present study attempts to investigate the impact of reduce energy subsidies of machinery of the cost of rapeseed production in Izeh county. Estimated model shows the most cross-price elasticity is related to chemical fertilizer and the lowest related to energy. Also, according to research results, targeted subsidies lead to increased energy production costs and reduced profitability. This means that price policies are not adequate approach to optimize the use of these inputs and complementary and compensatory policies with price policies, should be applied for fore mentioned input prices of subsidies input. Due to the high energy consumption of machines in production, it is suggested along with the policy of reducing energy subsidies for the cost of machinery or at least prevent its increase some acts has been taken and in this regard, the introduction of modern machinery with high efficiency in energy use be emphasized. INTRODUCTION Energy subsidies in Iran with the aim of assisting domestic production have long been common. In a way that goes beyond economic growth, and without regard to productivity, production energy consumption is increasing. Energy consumption in the period 1967 to 2010, from 7.11 million tons of crude oil equivalent reached to 157.1 million tons of crude oil. Based on the energy balance sheet, in 2011, energy consumption was 2592.63 million barrels of oil equivalent, which 45.8 million barrels of it, used in agriculture. Also look at the growth rate of energy consumption, while in this period the average annual GDP growth of Iran was 4.22percent. On the other hand, in Iran like many countries owning energy resources, its subsidy energy distribution caused the use of energy resources has led to high that this high use has traditionally been accompanied by low productivity (Bastanzad and Neely, 2005). However, the effort to reduce energy use and better use of this valuable resource as targeted subsidies is considered with the government that the agricultural sector is not an exception (Mousavi et al., 2012). Today, the agricultural sector to meet the growing need for food for a growing world population and to provide enough and adequate food, to a large extents dependent on energy consumption. Within agricultural inputs, fertilizers, pesticides, excreting plant pests and improved seeds, machinery because of great importance in agricultural production and a very high share of its subsidies to all subsidize for production, are of special importance (Najafi and Farajzadeh, 2009). Subsidizing this input, with current shape and in generality, for many years in our country is going, But existence of related problems referring to subsidizing inputs such as non-optimal consumption, environmental degradation, increasing the fiscal burden of the government, contrabandand direct connection of such payment with use of inputs, this process for achieve the goals of subsidizing policy is doubtful. In addition, recent government policies aiming fortargeting production and consumption subsidize on the one hand andneed to prepare agriculture sector for accession to the WTO and the need to reform the subsidy policies on the other hand, clarify the double importance of studying the economic effects of subsidies on agricultural inputs of agricultural production for planners and policy makers. In the same way, in the past couple of decades, several attempts to calculate and remove energy subsidies in different forms and provide practical and scientific solutions to optimize energy consumption in agricultural production have been done. Arya and Colleagues (2013) conducted a study to evaluate optimization of energy subsidies on agricultural products made in Iran. In this study, the increase in energy prices rise in the four scenarios of increasing prices to the border price level, release rate of th