Electricity tariff reform and rebound effect of residential electricity consumption in China

Abstract

China has implemented increasing-block power tariffs. It might be a breakthrough in the country's stagnant residential power tariff reform. Improving energy efficiency is the primary method adopted by the Chinese government for energy conservation in residential sector. However, negative effects brought by energy rebound would weaken the real effect of efficiency improvement. Therefore, this paper focuses on the impact of residential electricity tariff adjustment on rebound effect of residential electricity consumption in China. We set up an LA-AIDS Model (linear approximation of the almost ideal demand system model) to estimate the rebound effect of urban residential electricity consumption. The results show that the rebound effect is approximately 165.22%. This figure manifests the existence of ‘backfire effect’, indicating that efficiency improvement does not have energy-saving effect in practice. After the implementation of increasing-block electricity tariff policy in China, the rebound is reduced to 132.3%. In addition, we also obtain the electricity tariffs at which the rebound effect is less than 1 or even close to zero. In this regard, for Chinese electricity market, electricity tariff reform might be an effective method for mitigating rebound effect.