Notice2024-30629
Environmental Assessment and Finding of No Significant Impact
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 10, 2025
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB) is issuing this finding of no significant impact and accompanying environmental assessment regarding the CFPB's consideration of a proposed rule to implement a Congressional mandate to establish consumer protections for residential Property Assessed Clean Energy (PACE) financing. Based on the environmental assessment, the CFPB has concluded that there will be no significant effects on the human environment from the proposed PACE rule, and therefore, a finding of no significant impact is appropriate.
Full Text
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<title>Federal Register, Volume 90 Issue 6 (Friday, January 10, 2025)</title>
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[Federal Register Volume 90, Number 6 (Friday, January 10, 2025)]
[Notices]
[Pages 1968-1970]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30629]
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CONSUMER FINANCIAL PROTECTION BUREAU
Environmental Assessment and Finding of No Significant Impact
AGENCY: Consumer Financial Protection Bureau.
ACTION: Notice.
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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing
this finding of no significant impact and accompanying environmental
assessment regarding the CFPB's consideration of a proposed rule to
implement a Congressional mandate to establish consumer protections for
residential Property Assessed Clean Energy (PACE) financing. Based on
the environmental assessment, the CFPB has concluded that there will be
no significant effects on the human environment from the proposed PACE
rule, and therefore, a finding of no significant impact is appropriate.
DATES: The environmental assessment and finding of no significant
impact will be available January 10, 2025.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation and Guidance Program Analyst, Office of Regulations, at
202-435-7700 or <a href="https://reginquiries.consumerfinance.gov/">https://reginquiries.consumerfinance.gov/</a>. If you
require this document in an alternative electronic format, please
contact <a href="/cdn-cgi/l/email-protection#f9babfa9bba6b89a9a9c8a8a909b9095908d80b99a9f899bd79e968f"><span class="__cf_email__" data-cfemail="f0b3b6a0b2afb193939583839992999c998489b093968092de979f86">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Environmental Assessment
Description of the Proposed Action
On May 11, 2023, the CFPB published in the Federal Register a
proposed rule to implement a Congressional mandate to establish
consumer protections for residential Property Assessed Clean Energy
(PACE) financing. PACE loans, which cover the costs of home
improvements and result in a tax assessment on the consumer's real
property, are often promoted as a way to finance clean energy
improvements such as solar panels. The CFPB proposed to require lenders
to assess a borrower's ability to repay a PACE loan and to provide a
framework for how these loans will be treated under the Truth in
Lending Act (TILA). Section 307 of the Economic Growth, Regulatory
Relief, and Consumer Protection Act (EGRRCPA) directs the CFPB to
prescribe ability-to-repay rules for PACE financing and to apply the
civil liability provisions of TILA for violations.\1\ The proposed rule
would implement EGRRCPA section 307 and amend Regulation Z to address
the application of TILA to ``PACE transactions'' as defined in proposed
Sec. 1026.43(b)(15). This environmental assessment constitutes the
CFPB's review of potential environmental impacts from issuing the
proposed PACE rule.\2\
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\1\ 15 U.S.C. 1639c(b)(3)(C), Public Law 115-174 (2018).
\2\ The final PACE rule, published in the same Federal Register
edition, implements the proposal with small changes that do not
affect the environmental analysis.
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Purpose and Need for the Proposed Action
The purpose and need for the proposed rule is to fulfill the
Congressional mandate in the EGRRCPA to establish certain consumer
protections for residential PACE loans. The proposed rule's purpose and
need are further described in the preamble of the proposed rule.\3\
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\3\ See 88 FR 30388 (May 11, 2023).
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Environmental Impacts of the Proposed Action
None of the requirements of the CFPB's proposed rule would have
direct effects on the human environment. However, the CFPB expects that
fewer PACE loans would be originated as a consequence of the proposed
rule. This may occur, for example, because the proposed rule would
require a determination that consumers have the ability to repay the
PACE loan, and so consumers who do not have an ability to repay may not
qualify for PACE loans, or because the home improvement contractors who
currently market PACE loans would not collect the information necessary
for creditors to make ability-to-repay determinations in accordance
with the proposal.\4\
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\4\ For a discussion of the potential impacts of the proposed
rule, see 88 FR 30388 at 30417-28.
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To the extent that the projects currently funded by PACE would not
occur without PACE financing being available, and to the extent those
projects would provide environmental benefits, the CFPB's proposed rule
would reduce those environmental benefits. The CFPB considered the
impacts of its proposed rule relative to the alternative of no
action.\5\
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\5\ The rulemaking on PACE financing is required under 15 U.S.C.
1639c(b)(3)(C). For purposes of this analysis, the CFPB analyzed a
``no action'' alternative to provide a benchmark for environmental
effects.
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PACE loans are authorized by State laws only for certain types of
home improvement projects, which include solar panels, energy
efficiency improvements, water efficiency improvements, HVAC
improvements, and disaster resiliency improvements. Such projects might
improve the environment by reducing water or electricity consumption
and avoiding harmful emissions by generating electricity through
renewable, non-polluting sources, although it is unknown whether these
projects in fact provide these environmental benefits.\6\
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\6\ Other commenters on the proposed rule raised that potential
energy savings estimates from PACE programs ``are speculative and
may not materialize.'' Comments to The Consumer Financial Protection
Bureau Regarding Proposed Rule for Residential Property Assessed
Clean Energy Financing (Regulation Z), RIN National Consumer Law
Center & National Housing Law Project, July 26, 2023, <a href="https://www.regulations.gov/comment/CFPB-2023-0029-0101">https://www.regulations.gov/comment/CFPB-2023-0029-0101</a>.
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Public comments from a PACE industry trade association expressed
concerns that the proposed rule would have a significant adverse impact
on the environment by reducing the environmental benefits associated
with PACE financing, including benefits related to the reduction of
water and energy consumption. Specifically, the commenter stated that
all PACE projects to date (covering roughly 2010-2022) have created a
total of 537MW of solar capacity, and over the lifetimes of the
projects will reduce water consumption by 21 million gallons, reduce
greenhouse gas emissions by 9.5 million metric tons, and reduce
electricity consumption by 338 million kWh.\7\
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\7\ See Comments on Residential Property Assessed Clean Energy
Financing, RIN 3170-AA84, PACENation, July 26, 2023, <a href="https://www.regulations.gov/comment/CFPB-2023-0029-0115">https://www.regulations.gov/comment/CFPB-2023-0029-0115</a>.
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The comment, as well as the referenced article and white paper, do
not describe the methodology for estimating environmental benefits, and
the CFPB believes the statistic on solar generation of 537 MW in
particular is inconsistent with other data and significantly overstates
the impact on
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energy and water consumption that could result from the proposed rule.
Public data from California indicates that only about 170MW of solar
generation have ever been installed in that State funded by PACE loans.
Although PACE lending is also active in Florida, solar projects are
much less common in that State, making up only 7 percent of projects
funded between 2014 and 2019.\8\ And the overall number of PACE
projects in Florida is noticeably smaller than in California.\9\
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\8\ CFPB, Property Assessed Clean Energy (PACE) Financing and
Consumer Financial Outcomes at 14 (May 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_pace-rulemaking-report_2023-04.pdf/">https://files.consumerfinance.gov/f/documents/cfpb_pace-rulemaking-report_2023-04.pdf/</a> (CFPB PACE Report).
\9\ Id. at 8.
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Even taking the commenter's estimates at face value, and assuming
the CFPB's rule would completely eliminate PACE financing (an outcome
the CFPB does not expect to occur), this would not result in a
significant impact on the human environment. For instance, focusing on
greenhouse gas emissions, using the commenters' estimates, a generous
quantification of the rule's effect on greenhouse gas emissions would
result in eliminating the reduction of an estimated 9.5 million metric
tons of emissions over the lifetime of the PACE-funded projects. While
the CFPB does not have data indicating the useful life of PACE financed
projects, PACE loans are typically required to have terms that are
shorter than the useful life of the underlying project, and the average
term of a PACE loan is about 20 years.\10\ To be conservative, the CFPB
calculated the annual reduction in greenhouse gas emissions assuming a
20-year life, although the actual annual life of projects funded by
PACE loans is surely longer.\11\ Averaging 9.5 million metric tons over
a 20-year period would represent 475,000 tons annually over 20 years.
This would represent only 0.0075 percent of U.S. annual domestic
greenhouse gas emissions.\12\ Even compared just to greenhouse gas
emissions in California and Florida, this represents only around 0.079
percent of annual greenhouse gas emissions.\13\
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\10\ Id. at 13.
\11\ Because a calculation of annual benefits requires division
over the useful life of the projects, the shorter the assumed
project lifetime, the higher the amount of estimated annual
benefits.
\12\ See Inventory of U.S. Greenhouse Gas Emissions and Sinks,
<a href="http://EPA.gov">EPA.gov</a> (last updated Nov. 22, 2024), https://www.epa.gov/
ghgemissions/inventory-us-greenhouse-gas-emissions-and-
sinks#:~:text=Key%20findings%20from%20the%20latest,sequestration%20fr
om%20the%20land%20sector, (finding that in 2022, U.S. greenhouse gas
emissions totaled 6,343 million metric tons of carbon dioxide
equivalents).
\13\ See California Greenhouse Gas Emissions from 2000 to 2022:
Trends of Emissions and Other Indicators, California Air Resources
Board (Sept. 20, 2024), <a href="https://ww2.arb.ca.gov/ghg-inventory-data">https://ww2.arb.ca.gov/ghg-inventory-data</a>
(reporting 2022 emissions for California as 371.1 million metric
tons); Energy-Related CO2 Emission Data Tables, U.S. Energy
Information Admin. (Oct. 29, 2024), <a href="https://www.eia.gov/environment/emissions/state/">https://www.eia.gov/environment/emissions/state/</a> (reporting 2022 CO2 emissions (which may be less
than total greenhouse gas emissions) for Florida of 231 million
metric tons).
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The commenter did not assign a monetary value to the claimed
greenhouse gas emission reductions. One metric that federal agencies
have used to assign monetary value to the climate change effects of
incremental emissions of greenhouse gases is the social cost of
greenhouse gas calculation.\14\ A social cost of greenhouse gas
calculation using a 2 percent discount rate estimates the cost of a 9.5
million metric ton increase in greenhouse gas emissions at around $99
million annually over the 20-year life of the projects, compared to the
approximately $125.2 billion social cost estimate for annual Florida
and California greenhouse gas emissions, and the approximately $1.2
trillion social cost estimate of total annual domestic greenhouse gas
emissions.\15\
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\14\ See EPA Report on the Social Cost of Greenhouse Gases:
Estimates Incorporating Recent Scientific Advances, EPA (Nov. 2023),
<a href="https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf">https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf</a> (``The [social cost of greenhouse
gas] is the monetary value of the net harm to society from emitting
a metric ton of that [greenhouse gas] into the atmosphere in a given
year'').
\15\ This analysis was performed using the Environmental
Protection Agency's estimates from its 2023 report on the social
cost of greenhouse gases. See EPA Report on the Social Cost of
Greenhouse Gases: Estimates Incorporating Recent Scientific
Advances, EPA (Nov. 2023), <a href="https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf">https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf</a>; Calculating the
Social Cost of Greenhouse Gases, Institute for Policy Integrity,
N.Y. University School of Law, <a href="https://costofcarbon.org/calculator">https://costofcarbon.org/calculator</a>.
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The commenter's estimated benefits of PACE loans for energy and
water consumption similarly represent a small fraction of state and
national consumption. In terms of electricity consumption, averaging
the commenter's 338 million kWh estimate over a 20-year period would
represent 16.9 million kWh annually over 20 years. This would represent
only 0.0035 percent of annual electricity generation in California and
Florida combined \16\ and 0.00042 percent of U.S. annual total domestic
electricity consumption.\17\ Likewise, with respect to water
consumption, averaging the commenter's 21 million gallon estimate over
a 20-year period would represent 1.05 million gallons per year. This
represents 0.0000065 percent of combined annual California and Florida
water consumption based on 2015 estimates of those states' daily
consumption,\18\ and 0.00000089 percent of annual United States water
consumption, which was last estimated in 2015 to be about 322 billion
gallons per day, or 117.5 trillion gallons per year.\19\
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\16\ See U.S. Energy Information Admin., State Electricity
Profiles (Nov. 6, 2024), <a href="https://www.eia.gov/electricity/state/">https://www.eia.gov/electricity/state/</a>,
(estimating Florida's 2023 net annual electricity generation at
259,798,479 megawatt hours and California's 2023 net annual
electricity generation at 216,628,794 megawatt hours).
\17\ U.S. Energy Information Admin. Electricity explained (last
updated Dec. 18, 2023), https://www.eia.gov/energyexplained/
electricity/use-of-
electricity.php#:~:text=Electricity%20consumption%20in%20the%20United
,important%20to%20the%20U.S.%20economy (estimating annual
electricity consumption in the United States at 4 trillion kWh a
year in 2022).
\18\ See U.S. Geological Survey, Water use in the U.S., 2015,
<a href="https://labs.waterdata.usgs.gov/visualizations/water-use-15/index.html#view=USA&category=publicsupply">https://labs.waterdata.usgs.gov/visualizations/water-use-15/index.html#view=USA&category=publicsupply</a> (estimating 2015 water
consumption in California at 28,759 million gallons of water per
day, and in Florida at 15,285 million gallons of water per day).
\19\ See U.S. Geological Survey, Summary of Estimated Water Use
in the United States in 2015 (June 2018), <a href="https://pubs.usgs.gov/fs/2018/3035/fs20183035.pdf">https://pubs.usgs.gov/fs/2018/3035/fs20183035.pdf</a>.
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Thus, even if the outcome of the proposed rule were to eliminate
all the benefits claimed by this commenter, these impacts would be
relatively small. With respect to the potentially affected environment,
the CFPB has analyzed the significance of the proposed rule's potential
effects in a national context, as well as in relation to the States
with active PACE programs. With respect to the duration of the action,
the CFPB analyzed the proposed rule's potential short-term effects and
long-term effects in relation to the lifetime of the PACE projects. The
CFPB has determined that the proposed rule will not have significant
effects on public health and safety, and that the proposed rule would
not have effects that would violate Federal, State, Tribal, or local
law protecting the environment. Accordingly, the CFPB has determined
that the proposed rule will not have significant effects on the human
environment, including significant indirect or cumulative effects.
Moreover, as noted, the estimates from the commenter cited above
very likely overstate the environmental harms of a rule that reduces
PACE financing, for four reasons:
First, as discussed in the proposed rule, the CFPB does not expect
its rule to completely eliminate PACE financing.\20\ California
implemented legislation in 2018 that required consideration of ability
to pay and
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contained certain elements that were similar to the CFPB's proposed
ability-to-repay requirements, and while this reduced PACE volumes by
around 50 percent, it did not eliminate PACE lending. Further, given
that California already has requirements for PACE lenders to consider
consumers' incomes before extending a loan, any reduction in loan
volume in that State is likely to be more limited. And PACE financing
loan volumes have declined over time from their peak in 2018,\21\ such
that future environmental impacts may be less than historical
estimates.
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\20\ For a discussion of the potential impacts of the proposed
rule, see 88 FR 30388 at 30417-28.
\21\ CFPB PACE Report at 50.
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Second, based on the limited information available in the white
paper referenced through the commenter, those estimates seem to rely on
engineering estimates of the potential benefits of the home
improvements. Significant academic literature indicates that energy
efficiency improvements frequently underperform engineering estimates
in real world scenarios.\22\ This may occur due to imperfect
installation, imperfect maintenance, or rebound effects (that is,
energy efficiency leading to increased consumption due to reducing the
cost of consumption).
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\22\ See. e.g., Meredith Fowlie, Michael Greenstone & Catherine
Wolfram, Do Energy Efficient Investments Deliver? Evidence from the
Weatherization Assistance Program, 133 Q.J. of Econ. 3 (Aug. 2018).
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Third, the commenter's estimates assume that the projects funded by
PACE financing would not be completed without PACE financing. In
practice, consumers may find other forms of financing, or may pay in
cash. Indeed, some evidence suggests this may happen frequently. The
CFPB has documented that, based on public data from California, PACE
borrowers seem to frequently repay their PACE loans early, with as many
as 40 percent pre-paying.\23\ Although consumers may be required to pay
off their PACE loans in order to sell their property, this statistic
suggests that many consumers may have had other sources of funds to
cover their home improvements, and thus would likely complete the
project funded by the PACE loan even if PACE loans were not available.
The CFPB also analyzed public data on solar installations in California
for purposes of considering potential environmental effects of the
proposed rule for this environmental assessment.\24\ Solar projects
were by far the most common type of project funded by PACE in
California from 2014-2019. At the peak of PACE financing activity in
California in 2017, about 6 percent of distributed solar generation
projects in California were funded by PACE loans. However, when PACE
loans declined in 2018 following California's ability-to-pay
legislation, there was no noticeable drop in new solar installations,
indicating that many solar projects funded by PACE loans would still
have been completed without PACE being available. The CFPB also notes
that by 2022, only a few dozen solar projects in California were funded
by PACE loans each month.
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\23\ See 88 FR 30388 at 30421, table 1.
\24\ CFPB PACE Report, supra note 7 at 14-15; California
Distributed Generation Statistics, <a href="http://Californiadgstats.ca.gov">Californiadgstats.ca.gov</a>.
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Environmental Impacts of Alternatives to the Proposed Action
As discussed above, the CFPB considered the impacts of its proposed
rule relative to the alternative of no action. Under the no-action
scenario, currently projected environmental impacts would not
meaningfully change.
Agencies and Persons Consulted
As part of the CFPB's PACE rulemaking, EGRRCPA section 307 requires
that the CFPB ``consult with State and local governments and bond-
issuing authorities.'' \25\ In consultation calls conducted in November
2024 in furtherance of this requirement, CFPB staff notified State and
local governments and bond issuing authorities of the CFPB's intent to
prepare this environmental assessment and finding of no significant
impact, and shared the CFPB's preliminary conclusion that the proposed
rule would not have significant impacts on the environment. CFPB staff
invited input from call participants on that preliminary conclusion but
did not receive any. In addition, this environmental assessment
responds to comments that the CFPB received on the NPRM suggesting that
the CFPB conduct an analysis of the NPRM's effects on the environment.
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\25\ 15 U.S.C. 1639c(b)(3)(C)(iii)(II).
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II. Finding of No Significant Impact
Based on its review of the proposed rule and consideration of
comments, the CFPB has determined that the proposed rule, with the
adjustments as finalized, will not significantly affect the quality of
the human environment. No reasonably foreseeable significant
environmental impacts are expected from the proposed rule. Therefore,
the CFPB has determined that the preparation of an environmental impact
statement is not required for the proposed action, and a finding of no
significant impact is appropriate. This finding of no significant
impact incorporates the environmental assessment set forth in this
notice by reference.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-30629 Filed 1-8-25; 8:45 am]
BILLING CODE 4810-AM-P
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