Daniel Streitz, Halle Institute for Economic Research
Abstract: Large emitters reduced their carbon emissions by around 11-15% after the 2015 Paris Agreement ("the 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 in the post-Agreement period, an increase of over 75%. This divestment effect comes from asset sales and not from closures of pollutive facilities. There is no evidence for increased engagements in other emission reduction activities. Our results indicate significant global asset reallocation effects after the Agreement, 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: We show that auto finance—auto loans and the auto ABS that pool those loans—can supportthe transition to electric vehicles (EVs). We use 157 million monthly observations on auto loansbacking publicly-placed auto ABS to show three things. First, after controlling for borrowerrisk characteristics, auto loans backing EVs default 30 percent less in percentage change termsrelative to traditional combustion engine vehicles. This lower risk flows through to the borrowerin loan terms; EVs have, on average, 22 basis point lower interest rates than combustion vehicles,equivalent to a $2,000 lower price on the vehicle. Part of the lower default rate is attributableto insulation from gasoline price shocks: a one standard deviation increase in gas prices wouldresult in a full percentage point lower default rate for EV borrowers relative to combustion engineborrowers, commensurate with the interest rate results. These lower default rates are reflectedin higher initial prices for auto ABS, although the pass-through is incomplete for lower-ratedtranches.
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
