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About Us > Economic intelligence services > UK energy and environment forecasts > How are the forecasts produced?

UK energy-environment-economy forecasts

How are the forecasts produced?

Underpinning the detailed E3 analysis is the Cambridge Multisectoral Dynamic Model (MDM-E3). This model has been developed over three decades to provide regular forecasting services and scenario analysis. We provide detailed forecasts of energy demand and environmental emissions, covering the period up to 2025, disaggregated by 25 fuel users and 11 fuel types. These forecasts are not produced in isolation, but are consistent with our detailed industrial forecasts and macroeconomic view of the economy, which are also provided as part of the service.

For more detail on the production of the economic forecasts, click here. 

MDM-E3 is a fully integrated model of the UK economy in which there is feedback between energy prices, energy demand and economic activity. The energy sub-model consists of a set of energy demand equations, for total energy and by fuel type, used to determine final demand for fuels by each fuel user, and a capacity-based sub-model of the electricity supply industry which allows for fuel substitution in power generation and is used to calculate fuel use by power generation. The electricity supply sub-model also includes the treatment of combined heat and power (CHP). The sub-model is linked to a dynamic investment decision model of the take up of emerging non-carbon electricity generation technologies whose costs are likely to fall in future through innovation, investment and learning by doing and where the process of substitution is likely to be non-liner involving thresholds effects. Prices and levels of economic activity feed into the sub-model from the main model. The forecasts for fuel demand feed back into the main model to give expenditure on fuels by industry, households and government, and into the forecasts of CO2 and SO2 emissions.

MDM-E3 also includes a detailed simulation submodel of household energy consumption, allowing for 15 types of heat retention measures, and 41 energy appliances.  Although the household submodel can feed back results to the rest of the model, this facility is not switched on for the production of our regular forecast, but is used only in particular studies.

We have also developed a bottom-up submodel of the transport sector in collaboration with 4CMR that now replaces the econometric 'top-down' treatment of estimating energy demand.

We are transparent in our methodology and explain our assumptions clearly, even involving our subscribers in the process, and we benefit from the years of experience of our personnel. The team is led by Dr Terry Barker, Chairman of CE, and Director of the Cambridge Centre for Climate Change Mitigation Research (4CMR), Department of Land Economy, University of Cambridge, who continues to be actively involved in path-breaking model developments. Paul Ekins is a leading environmental economist at the forefront of environmental thinking - he is Professor of Energy and Environment Policy, UCL Energy Institute, University College, London.

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For further information, including prices, and to order the service, email:
Phil Summerton
Manager, UK Energy Modelling