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How do lenders price energy efficiency? Evidence from posted interest rates for unsecured credit in France

Abstract : Basic principles of loan pricing predict that the interest rate charged for energy efficiency investment is lower than for conventional investment. We test this hypothesis using a unique dataset of posted interest rates retrieved on a weekly basis from the websites of 15 lending institutions covering the near totality of the French market for unsecured credit. Crucially, our data are immune from sorting bias based on borrower characteristics. We find that the interest rate spread between conventional and energy efficiency investment was negative in 2015 and turned positive in 2016. A similar switch occurred to the spread between home renovation investment and vehicle investment. These results together imply that loans for home energy renovation were consistently charged relatively high interest rates. This can be interpreted as a new barrier to energy efficiency, with adverse consequences for scaling up home energy renovation. One possible explanation is that lenders use project characteristics as a screening device of unobservable borrower characteristics.
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https://hal.archives-ouvertes.fr/hal-01890636
Contributor : Louis-Gaëtan Giraudet <>
Submitted on : Monday, October 8, 2018 - 6:08:06 PM
Last modification on : Friday, October 23, 2020 - 4:46:43 PM
Long-term archiving on: : Wednesday, January 9, 2019 - 4:18:10 PM

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  • HAL Id : hal-01890636, version 1

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Louis-Gaëtan Giraudet, Anna Petronevich, Laurent Faucheux. How do lenders price energy efficiency? Evidence from posted interest rates for unsecured credit in France. 2018. ⟨hal-01890636v1⟩

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