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Why are oil demand projections from the DECC energy model so different from the 2050 analysis

The 2050 Pathways and the Energy Model are two separate models, and there is very little overlap in inputs. That explains why you are seeing different projections in oil demand.

In the Energy Model, oil demand is assumed to be a function of total energy demand and the relative price of oil (compared to alternative fuels). Hence oil demand varies between the different price scenarios. In the 2050 calculator, fossil fuel prices are not taken into account. Instead, it is assumed that, in every pathway, fossil fuels are used when all the available low carbon sources have been exhausted (as stated on p9 of the 2050 Analysis report).

Another difference between the models is that the 2050 Model has a constraint on emissions while the Energy Model does not. So, in the 2050 model, the oil demands are constrained so that the emissions target is met (80% reduction by 2050 on the 1990 level). In the Energy Model, existing policies are taken into account, but emissions are not constrained as such.

There are also differences in assumptions: the Energy Model has not modelled the electrification of cars yet – this is a significant source of the oil demand reduction in the 2050 model. Long term growth assumptions are also different. (EM: 2.24%, 2050 model:2.5%).

(Response from Sonia Krylova - DECC economist)

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