PhD Seminar with Philip Fliegel

Title: The influence of climate policies on the credit market: Evidence from securitized loans in the transportation sector

Abstract:

We study the impact of the German national CO2 price on car loans. The CO2 price specifically targets the transportation sector and entails a steadily rising price path from €25 per ton of CO2 in 2021 to €55 in 2025. By combining data on 24 million European car loans with detailed vehicle information, we apply a tight empirical differences-in-differences design that compares the within-variation in similar car models across treated and control countries. We find a sizable treatment effect of 0.5 percentage points higher interest rates for affected cars for both the policy announcement in 2019 and the policy implementation in 2021. Moreover, we find shrinking lending volumes as a result of the policy. Further analysis reveals notable heterogeneity in the results. Most notably, the results only hold for the most fuel intensive cars, indicating that banks differentiate their lending decision based on fuel efficiency. Interestingly, we only find an effect for commercial banks, which suggest that manufacturer owned captive banks try to protect manufacturers from rising transition risks.  Our results are robust to using balanced/unbalanced panels, model, country, bank and time fixed effects as well as different clusters for standard errors. These results strongly indicate that climate policies not only have direct effects on emissions through prices but also impact emissions indirectly through financial markets.