Abstract: Zero-interest green loan programs (ZIGL) are gaining traction to address the tremendous financing needs implied by climate change mitigation. One such program, the French Éco-Prêt à Taux Zéro, significantly under-performed the expectations the government had for it at its inception in 2009. Using an event-study design applied to a panel survey of 10,000 households, we find that the program had a substantial, yet short-lived, impact on home energy retrofits. On the extensive margin, eligibility to the program significantly increased the rate of renovation by 3-4 percentage points (+20-25%) in the first two years, but not thereafter. The effect is strongest (8pp) for low-income homeowners. On the intensive margin, we find a low effect both in terms of additional actions per renovation and additional spending. Our results are robust to a range of robustness checks, including placebo regressions and propensity score weighting. We explore the reasons for the program under-performance from both demand and supply sides. On the demand side, we point towards institutional and macroeconomic factors that can explain the lack of take-up. On the supply side, we study banks’ opportunity costs of providing ZIGLs instead of consumption or housing loans. We find that banks decrease ZIGL provision by 5% following a 1 percentage point rise in the opportunity cost, suggesting that monetary incentive is crucial for zero-interest green loan programs to work.

coécrit avec Ilya Eryzhenskiy, Mariona Segu et Maryam Vahid Dastgerdi