Success and Failure of a Zero-Interest Green Loan Program : Evidence from France

Zero-interest green loan programs (ZIGL) are gaining traction to address the tremendous financing needs implied by net-zero emission targets. We provide the first evaluation of such a program, the \emph{Éco-Prêt à Taux Zéro}, introduced in France in 2009 to encourage home energy retrofits. Using an event-study design applied to a panel survey of 10,000 households, we find evidence that the program had a substantial, yet short-lived, effect. Eligibility to the program increased investment by 20-22\% on the extensive margin and 2-3\% on the intensive one, thereby generating 3\% electricity savings. The effects are however limited to the first two years, after which they turn non-significant. They are primarily driven by low-income homeowners, suggesting the program effectively alleviates credit constraints. These results are robust to a range of robustness checks, including placebo regressions and propensity score weighting. They lead to leverage estimates in the 1.3-1.7 range in the `successful' period and below 1 thereafter. Using additional banking data to investigate the post-2011 failure, we find suggestive evidence that banks exploited prospective borrowers’ incomplete information to sell them their own loan products in lieu of a ZIGL