Do lenders price diesel risk? Evidence from Dieselgate and low-emission zones in captive vs. independent banks

Matteo Falagiarda, Steven Ongena, Alessandro Scopelliti and Winta Beyene

No 3228, Working Paper Series from European Central Bank

Abstract: Transitioning to a sustainable economy and reducing air pollution hinge on appropriate economic incentives and financing conditions. The auto loan market offers a prime setting, as lenders’ credit terms can either discourage or incentivize the purchase of high-pollution vehicles. Using loan-level data, we examine how captive and independent banks adjust lending conditions in response to information and regulatory shocks affecting diesel vehicles. Exploiting the 2015 diesel emissions scandal and the introduction of local circulation restrictions, we show that lending responses differ systematically across lender types, with captive banks tending to weaken, rather than reinforce, the effectiveness of environmental regulation for air pollution. JEL Classification: G21, G51, Q53, Q58

Keywords: captive banks; car circulation restrictions; car loans; diesel emissions scandal; independent banks (search for similar items in EconPapers)
Date: 2026-05
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263228

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