In a residential building, a balcony of an upper floor can act as an overhang; and provide solar shading and reduction in electricity consumption of air-conditioner (A/C) for a flat on the underneath floor. However, some residential flats located on the lower levels may receive substantial self-shading effect from some adjacent flats in the same building block, leading to an insignificant shading effect from a balcony. As there is substantial amount of energy consumed and pollutant generated during the production and disposal of a balcony, it is vital to investigate the energy and environmental performance of residential flats installed with balconies at various floor levels. The objective of this study is to investigate an appropriate floor level of a residential building above which balconies should be incorporated. A 21-story residential building was modeled using EnergyPlus. Simulation results indicated that, for a west-facing flat, only the flats located on 15/F to 20/F can give acceptable environmental payback periods, ranging from 58.3 years to 40.7 years, i.e. within the lifespan (60 years) of a building. The corresponding annual savings in A/C consumption range from 234.9 MJ (2.60%) to 336.7 Mj (3.57%). The research methodology and findings are presented in this paper. (C) 2015 Elsevier Ltd. All rights reserved.