Estimating energy conservation potential in China's commercial sector

With low energy intensity and great potential for growth, the commercial sector has become one of the key sectors for energy conservation and emission reduction in the context of China's rapid urbanization process. Based on the EIA (Energy Information Administration) statistical methods, this paper calculates the energy consumption of China's commercial sector from 1981 to 2012, specifies the determinants of commercial energy demand, forecasts future energy consumption and estimates the energy conservation potentials using the Johansen co-integration methodology. The results indicate: (i) GDP (Gross Domestic Product) and urbanization have positive effects on the energy consumption of the commercial sector while labor productivity and energy price contribute to reduction in the sector's energy consumption. (ii) Under the basic scenario, energy consumption of the commercial sector will be 317.34 and 469.84 Mtce (million tons of coal equivalent) in 2015 and 2020 respectively. (iii) Under the moderate and advanced scenario, about 187.00 and 531.45 Mtce respectively of the energy consumption of the commercial sector can be conserved from 2013 to 2020. The findings have important implications for policy-makers to enact energy-saving policies.