Introduction

Low-carbon pathways are modelled using various models mostly rooted in either of the two traditions—the macroeconomic approach is usually classified as top-down models or the energy engineering approach is referred to as bottom-up. ‘Hybrid’ models differ significantly from the conventional top-down and bottom-up models by capturing the technological details and economic richness in a single framework. This framework integrates the two approaches either as soft link, which represents a weak integration in the form of the exchange of shared variables with two separate mathematical formats for two approaches, or hard link, where the models are strongly integrated in a single mathematical format. In this chapter, we build on Chapter 5 by expanding the two-sector KLEM model to a multi-sector economy-wide model.

Evolution of top-down modelling approach

The two broad categories of EEE models—bottom-up and top-down—are distinguished based on the coverage of macroeconomic details and technology explicitness. Apart from this classification, the models are classified based on other parameters, such as economic coverage (that is, ‘full’ or ‘partial’ economy), foresight levels (that is, ‘perfect foresight’ or ‘recursive dynamic’); the economic representation of the substitutability of goods; flexibility levels (that is, scope of EEE system changes); regional, sectoral, technology, and GHG coverage; and the endogeneity level of the technological change.

Standard top-down models are based on the CGE setup. One such platform is IMACLIM modelling, which originated at the Centre for International Research on Environment and Development (CIRED), Paris, in the 1990s.