Energy Efficiency in the Service Industry: An empirical analysis using establishment data

Author Name MORIKAWA Masayuki  (Vice Chairman & Vice President, RIETI)
Creation Date/NO. April 2011 11-J-062
Research Project Research on Productivity Growth in Service Sector
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To achieve both sustainable economic growth and a reduction of CO2 emissions has been an important policy agenda in recent years. Although efficiency in energy consumption in the manufacturing sector has been significantly improving, energy consumption in the service and household sectors continues to increase steadily. Currently, the service industry accounts for about 20% of final energy use in Japan. This paper, by using establishment-level micro-data from the Energy Consumption Survey, 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 about 12% when the density in municipality populations doubles. The result suggests that, under the trend towards the service economy, deregulation of excessive restrictions hindering urban agglomeration, investment in infrastructures in the city centers, and expansion of clean energy supply in the rural areas would contribute to environmentally friendly economic growth.