The design of the sensitivity tests

The sensitivity tests were done by imposing a set of long-term price elasticities on the estimating equations for total secondary energy demand and therefore in the solution of the model. (Note that the fuel share equations have been left unchanged in this analysis.) The base specification is that described in Section 9.3 above; the low, high and higher elasticity assumptions change the imposed elasticities across the board by +0.1, -0.1 and -0.2 respectively. These changes are introduced into the estimating equations by varying the imposed lags sufficiently to produce the desired long-term elasticity, i.e. the short-term elasticities remain exactly as before. As a comparison, a set of equations with zero or very low elasticities3 have also been estimated and included in the model and projections.

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