ABSTRACT
There are two principal approaches that can be used to forecast the energy use and CO2 emissions of a particular sector of the economy – namely: top down or bottom up. Top-down methods tend to start with aggregate data and then disaggregate this data as far as they can. They focus on the interaction between the energy sector and the economy at large, using econometric equations to model the relationships that exist between the energy sector and economic output. They also rely on aggregate economic behaviour (which is based on past energy-economy interactions) to predict future changes in energy use and CO2 emissions (IEA, 1998). Data input into these models largely comprises econometrically based data, such as gross domestic product (GDP), fuel prices and income. Various other factors that can have an important influence on energy use can also be incorporated within top-down models – for instance, technological progress, saturation effects and structural change.
