Bridging the energy efficiency gap: using bottom-up information in a top-down energy demand model

• Published in: Energy economics Vol. 23; no. 1; pp. 57 - 75
• Main Authors: Koopmans, Carl C., te Velde, Dirk Willem
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 2001; Elsevier Science; Elsevier; Elsevier Science Ltd
• Series: Energy Economics
• Subjects: Applied sciences; Bottom-up information; Demand models; Discount rates; Economic data; Energy; Energy demand; Energy economics; Energy efficiency; Energy efficiency gap; Energy policy; Environmental economics; Estimation; Exact sciences and technology; General, economic and professional studies; International; Methodology. Modelling; Policy analysis; Power demand; Studies; Supply & demand; Netherlands; Europe; Bottom-up information; Q43; Energy demand; Q48; Energy efficiency gap; Q41; Energy consumption; Experimental test; Methodology; Pollution control; Pollution prevention; Energy economy; Energy policy; Long term; Modeling; Gross domestic product; Forecasting; Statistics; Simulation; Energy conservation; Economic impact; Medium term; Taxation
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/S0140-9883(00)00054-2

Bottom-up modelers typically predict a lower energy demand and a higher energy efficiency than top-down modelers do, leading to the notion of the energy efficiency gap. This difference is often ‘explained’ by combining bottom-up information with unrealistically high discount rates. In this paper we combine the bottom-up and top-down approaches in an energy demand model. The model has a top-down structure, but we employ bottom-up information to estimate most of its parameters, using the discount rate that firms say they use. This new approach provides a partial reconciliation of top-down and bottom-up methods, which proves to be very useful for policy analysis.