Factors that affect energy consumption: An empirical study of Liaoning province in China

Kun Dong* and Fei Tan

Abstract

This paper examines the factors that affect energy consumption in Liaoning Province, China. Based on a vector autoregression (VAR) model and an empirical test application of time series data between 1978 and 2010, we show a stable long-run equilibrium relationship between energy consumption and the four identified influencing factors (i.e., GDP, population size and the proportion of service/heavy industries). Specifically, the proportion of heavy industries has the most significant influence on energy consumption in the long-term, while the proportion of service industries has a significant influence in the short-term. Finally, the disturbance of demographic factors on energy consumption is the least significant determinant according to the results of the impulse response function and variance decomposition.