How Do Lenders Price Energy Efficiency? Evidence From Personal Consumption Loans
31 Pages Posted: 3 Apr 2019
Date Written: March 2019
At least ex ante, energy efficiency improvements increase investor’s solvency. Associated loans should therefore carry lower interest rates than do otherwise conventional loans. We test this hypothesis using unique weekly panel data on posted interest rates scraped from loan simulators made available online by French credit institutions during 2015-2016. On average, we find that lenders charged a green premium in 2015 but offered a green discount in 2016. We also find that, absent green attributes, interest rates are higher for home retrofit loans than for vehicle loans, which suggests that lenders use the loan purpose as a screening device of unobserved borrower characteristics. Our results together imply that loans for home energy renovation were consistently charged relatively high interest rates, with adverse consequences for scaling up home energy renovation.
Keywords: energy efficiency gap, personal consumption credit loan, home energy retrofit, screening, data scraping, online prices
JEL Classification: D14; G21; Q41
Suggested Citation: Suggested Citation