Rapid urbanization economic development in developing counties has been taking place hand-in-hand with diffusion of household appliances like air conditioner, and residential and commercial energy consumption in those countries will become one of the key factors affecting global warming. This study took Shanghai, one of the biggest cities in China as a case study area, and aimed to predict future (by the year of 2030) energy consumption of residential and commercial sector based on our estimation model of energy demand and CO₂ reduction potential. Taking into several CO₂ reduction measures, CO₂ reduction potential was estimated. The results suggested that our estimation model could provide several useful policy implications and would be applicable to the other cities of China.