Differentiated green loans

Louis-Gaëtan Giraudet (), Anna Petronevich and Laurent Faucheux
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Louis-Gaëtan Giraudet: ENPC - École nationale des ponts et chaussées, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
Anna Petronevich: Banque de France - Banque de France - Banque de France
Laurent Faucheux: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique

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Abstract: Scaling up home energy retrofits requires that associated loans be priced efficiently. Using a unique dataset of posted loan prices scraped from online simulators made available by French credit institutions, we examine the differentiation of interest rates in relation to project risk. Crucially, our data are immune from sorting bias based on borrower characteristics. We find that greener, arguably less risky, automobile projects carry lower interest rates, but greener home retrofits do not. On the other hand, conventional automobiles carry lower interest rates than do conventional home retrofits, despite arguably similar risk. Our results are robust to a range of robustness checks, including placebo tests. They together suggest that lenders use underlying assets to screen borrower's unobserved willingness to pay, which can cause under-investment in home energy retrofits. We thereby point to a new form of the energy efficiency gap. This has important policy implications in that it can explain low uptake of zero-interest green loan programs.

Keywords: personal loan; home energy retrofit; screening; data scraping; online prices; energy efficiency gap (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
Note: View the original document on HAL open archive server: https://hal.science/hal-01890636v2
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Citations: View citations in EconPapers (6)

Published in Energy Policy, 2021, 149, pp.111861. ⟨10.1016/j.enpol.2020.111861⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01890636

DOI: 10.1016/j.enpol.2020.111861

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