Population density and efficiency in energy consumption: An empirical analysis of service establishments

This study, using novel establishment-level microdata from the Energy Consumption Statistics, empirically analyzes the effect of urban density on energy intensity in the service sector. According to the analysis, the efficiency of energy consumption in service establishments is higher for densely populated cities. Quantitatively, after controlling for differences among industries, energy efficiency increases by approximately 12% when the density in a municipality population doubles. This result suggests that, given a structural transformation toward the service economy, deregulation of excessive restrictions hindering urban agglomeration, and investment in infrastructure in city centers would contribute to environmentally friendly economic growth.

► We analyze the effect of urban density on energy intensity in the service sector. ► We use novel establishment-level microdata in Japan. ► The efficiency of energy usage in service establishments is higher for densely populated cities. ► Energy efficiency increases by 12% when the density in a municipality population doubles.