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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 [www.gpo.gov]
[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 https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

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, https://www.regulations.gov/comment/CFPB-2023-0029-0101.
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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, https://www.regulations.gov/comment/CFPB-2023-0029-0115.
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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

[[Page 1969]]

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), https://files.consumerfinance.gov/f/documents/cfpb_pace-rulemaking-report_2023-04.pdf/ (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, 
EPA.gov (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), https://ww2.arb.ca.gov/ghg-inventory-data 
(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), https://www.eia.gov/environment/emissions/state/ (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), 
https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (``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), https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf; Calculating the 
Social Cost of Greenhouse Gases, Institute for Policy Integrity, 
N.Y. University School of Law, https://costofcarbon.org/calculator.
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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), https://www.eia.gov/electricity/state/, 
(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, 
https://labs.waterdata.usgs.gov/visualizations/water-use-15/index.html#view=USA&category=publicsupply (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), https://pubs.usgs.gov/fs/2018/3035/fs20183035.pdf.
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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

[[Page 1970]]

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, Californiadgstats.ca.gov.
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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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