Rebound effect is recognized as a loss ratio of energy savings or environmental emission reductions. But, this research suggests a positive side of rebound effect to consumers – welfare effect. We define the welfare effect using a dual form to rebound effect, explain its mechanism in the same economic framework with rebound effect, and give its estimation formula using Taylor expansion. Four consumer types are classified according to the sizes of rebound effect and welfare effect, and the determinants of the classification are discussed. We then conduct empirical research on both rebound effect and welfare effect for urban residents in China. We find backfire and large welfare effect, revealing that the urban residents in China are likely to remain ‘the insufficient in demand’ for a long period. Besides, rebound effect tends to decline and welfare effect to increase when energy efficiency measures are enhanced.
Keywords Rebound effect, welfare effect, loss ratio of emission reduction, gain ratio of welfare benefits, LA-AIDS, EEIO-LCA