ENERGY FOR A SUSTAINABLE WORLD - World Resources Institute

Appendix
A Top-Down Representation of Our
Bottom-Up Global Energy Demand
Scenario
The "bottom-up" or end-use construction of
the global energy demand scenario presented
in Chapter IV and summarized in Figure 9 will
be unfamiliar to those more accustomed to
"top-down" model representations of the
energy future.
To express our global energy demand
scenario in terms more familiar to most energy
modelers, we have constructed a simple model
relating commercial final energy demand per
capita (FE/P) to gross domestic product per
capita (GDP/P), the average price of final
energy (P e ), a rate of energy efficiency improvement
(c) that is not price-induced, an income
elasticity (a), and a long-run final energy
price elasticity (-b):
FE/P (t) = A x [GDP/P (t)] a x [P e (t)]' b /(I + c)t,
where "A" is a constant. This is the aggregate
energy demand equation underlying the Institute
for Energy Analysis/Oak Ridge Associated
Universities (IEA/ORAU) global energy-economy
model. 1 Here the equation is applied
separately to industrialized and developing
countries, relating FE/P, GDP/P, and P e values
in 2020 to those in 1972 for illustrative values
of the parameters (a, b, and c).
Figures Al and A2 show per capita GDP and
energy-price parameters consistent with this
study's energy demand scenarios for industrialized
countries and for developing countries,
respectively, for alternative assumptions about
income and price elasticities and the non-priceinduced
energy-efficiency improvement rate.
The year 1972 is chosen as the base year for
this modeling exercise because it is the last
year before the first oil price shock, so
presumably the economic system was then in
equilibrium with the existing energy prices
(unlike the situation in 1980, say). For this base
year, the values of FE/P were 4.7 kW and 0.38
kW, compared to the 2020 scenario values of
2.5 kW and 1.0 kW for industrialized and
developing countries, respectively. (Note: the
commercial energy use values needed for this
analysis account for only about half the total
final energy use in developing countries at
present.)
For the income elasticity a value of 0.8 was
selected to capture the effects of the ongoing
shift to less energy-intensive economic activity
in industrialized countries. The value of unity
assumed in many modeling efforts is included
for comparison.
For developing countries, income elasticities
of 1.4 and 1.1 are assumed for these displays.
The value of 1.4 was used for developing countries
in the 1983 IEA/ORAU study 2 and may be
roughly characteristic of the historical situation
in developing countries. However, as developing
countries modernize in the decades ahead,
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