Daniel Streitz, Halle Institute for Economic Research
Abstract: Large emitters reduced their carbon emissions by 11-15% after the 2015 Paris Agreement relative to public firms that are less in the limelight. We show that this effect is predominantly driven by divestments. Large emitters are 9 p.p. more likely to divest pollutive assets post-Agreement, an increase of over 75%. This effect comes from asset sales and not from closures of pollutive facilities and is stronger for emitters that face increased investor pressure. There is no evidence for increased engagements in other emission reduction activities. Our results indicate significant global asset reallocation effects, shifting emissions out of the limelight.
Elizabeth Klee, Federal Reserve Board of Governors
Adair Morse, University of California-Berkeley
Chaehee Shin, Federal Reserve Board of Governors
Abstract: Financing cost differentials tilt the calculus for households toward electric vehicles (EVs). Using 85 million observations on U.S. auto loans, we study households' credit risk by engine type, seek to uncover the sources and ask if credit risk differentials are being priced. We find that EV borrowers default 29% less relative to internal combustion engine vehicle (ICEV) borrowers with a back-of-the-envelope value of $1,457 in lender savings. To disentangle selection from ex post exposure to differential costs of running an EV, we implement a differential shock exposure by treatment model of Borusyak and Hull (2023). We find that a prolonged higher gasoline price regime could result in ICEV borrowers defaulting up to a 83% increase. Do lenders pass along these savings to borrowers? EV borrowers pay 2.2 percentage point lower interest rates, the equivalent of $2,711 in foregone payments. This lower rate is only for captive (manufacturer-based) lenders, not for bank and nonbank lenders, suggestive of policy and strategic motives by manufacturers, not a passing along of credit risk value. Another $1,457 is probably not being priced to households. Finally, we find that the ABS market knows, at least partially, allowing for less in loan loss reserves buffering the ABS, reflecting $233 in savings for the ABS issuer .
Discussant: Jordan Nickerson, University of Washington
Abstract: Using comprehensive auto loan data from Europe, we document a gap in financing terms between Electric Vehicles (EVs) and non-EVs. EVs, compared to non-electric models in the same car family or pair, are financed with higher interest rates, lower loan-to-value ratios, and shorter loan durations. We show that the primary driver of this EV financing gap is the technological risk associated with EVs. The rapid and uncertain evolution of EV technologies accelerates technology obsolescence, diminishing the resale value of EVs. In response, lenders charge higher interest rates on EV loans. Consumer demographics, lenders' market power, and macroeconomic factors contribute minimally to the EV financing gap. Technological carbon-transition risk is priced in financing terms of green durable assets consumption.
Discussant: Xiaoyun Yu, Shanghai Jiao Tong University
