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Do lenders price diesel risk? Evidence from Dieselgate and low-emission zones in captive vs. independent banks

Author

Listed:
  • Falagiarda, Matteo
  • Ongena, Steven
  • Scopelliti, Alessandro
  • Beyene, Winta

Abstract

Transitioning to a sustainable economy and reducing air pollution hinge on appropriate economic incentives and financing conditions. The auto loan market offers a prime setting, as lenders’ credit terms can either discourage or incentivize the purchase of high-pollution vehicles. Using loan-level data, we examine how captive and independent banks adjust lending conditions in response to information and regulatory shocks affecting diesel vehicles. Exploiting the 2015 diesel emissions scandal and the introduction of local circulation restrictions, we show that lending responses differ systematically across lender types, with captive banks tending to weaken, rather than reinforce, the effectiveness of environmental regulation for air pollution. JEL Classification: G21, G51, Q53, Q58

Suggested Citation

  • Falagiarda, Matteo & Ongena, Steven & Scopelliti, Alessandro & Beyene, Winta, 2026. "Do lenders price diesel risk? Evidence from Dieselgate and low-emission zones in captive vs. independent banks," Working Paper Series 3228, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20263228
    Note: 2438814
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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