Basic total energy demand (BENDEM) for a given region or country is tied very closely to gross domestic product (GDP). IFs actually uses GDP from a previous time cycle (with an estimate of growth) because the recursive structure of IFs computes current GDP later.
The units of energy required for every unit of gross domestic product (ENDK) are a function of GDP per capita in purchasing power terms (GDPPCP), computed in a table function.
Initial data from countries/regions is unlikely to fall exactly on this table function initially. To reconcile computed energy demand (ENDEM) the first year with empirical demand, IFs computes an internal adjustment multiplier (ENDM). In addition, IFs moves countries or regions that initially exhibit energy demand per unit far from the table function value (e.g., Russia), towards the table function value over the long term (a process that the equations do not show).
Final energy demand (ENDEM) is a price-responsive function of this basic energy demand. Possible tax on the consumer’s price added by carbon taxes (CarTaxEnPriAdd), as computed in the environmental submodel, is added to the basic market price. In an earlier version of the submodel, we used a smoothed or moving-average, regionally-specific energy price (SENPRI) relative to the initial price value (ENPRI). Because energy is a quite highly integrated global market, and in order to enhance behavioral stability, we have gone to using the world energy price (lagged one year) relative to initial price; prices affect demand through an elasticity (ELASDE). The user can force change in energy demand directly via an energy demand multiplier (ENDEMM).