Energy consumption and GDP growth in Beijing: Cointegration and causality analysis

The Johansen cointegration technique and the vector correction model (VECM) are used to examine the causal relationship between energy consumption (LEC) and gross domestic product (LGDP) for Beijing during the period of 1980 to 2008. Results indicate that LEC and LGDP for Beijing are related by one cointegrating vector and there is a long-run unidirectional causal relationship from GDP to energy consumption. The finding has significant implications from the point of view of energy conservation, emission reduction and economic development.