Environmental Assessment and Finding of No Significant Impact, 1968-1970 [2024-30629]
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Federal Register / Vol. 90, No. 6 / Friday, January 10, 2025 / Notices
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[FR Doc. 2025–00344 Filed 1–8–25; 8:45 am]
BILLING CODE 6353–01–P
CONSUMER FINANCIAL PROTECTION
BUREAU
Environmental Assessment and
Finding of No Significant Impact
Consumer Financial Protection
Bureau.
ACTION: Notice.
AGENCY:
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 CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
khammond on DSK9W7S144PROD with NOTICES
SUMMARY:
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,
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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 § 1026.43(b)(15).
This environmental assessment
constitutes the CFPB’s review of
potential environmental impacts from
issuing the proposed PACE rule.2
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
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
To the extent that the projects
currently funded by PACE would not
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.
3 See 88 FR 30388 (May 11, 2023).
4 For a discussion of the potential impacts of the
proposed rule, see 88 FR 30388 at 30417–28.
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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
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, nonpolluting sources, although it is
unknown whether these projects in fact
provide these environmental benefits.6
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
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
energy and water consumption that
could result from the proposed rule.
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.
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.
7 See Comments on Residential Property Assessed
Clean Energy Financing, RIN 3170–AA84,
PACENation, July 26, 2023, https://
www.regulations.gov/comment/CFPB-2023-00290115.
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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
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
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_202304.pdf/ (CFPB PACE Report).
9 Id. at 8.
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-andsinks#:∼:text=Key%20findings%20from%20the%20
latest,sequestration%20from%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-
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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
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
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).
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.
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-ofelectricity.php#:∼:text=Electricity%
20consumption%20in%
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1969
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
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
contained certain elements that were
similar to the CFPB’s proposed ability20the%20United,important%20to%20the%20
U.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/#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.
20 For a discussion of the potential impacts of the
proposed rule, see 88 FR 30388 at 30417–28.
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1970
Federal Register / Vol. 90, No. 6 / Friday, January 10, 2025 / Notices
khammond on DSK9W7S144PROD with NOTICES
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.
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).
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 prepaying.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
21 CFPB
PACE Report at 50.
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).
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.
22 See.
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California were funded by PACE loans.
However, when PACE loans declined in
2018 following California’s ability-topay 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.
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 bondissuing 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.
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
25 15
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U.S.C. 1639c(b)(3)(C)(iii)(II).
Frm 00034
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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
CONSUMER FINANCIAL PROTECTION
BUREAU
Policy Statement on No-Action Letters
Consumer Financial Protection
Bureau.
ACTION: Policy statement.
AGENCY:
The Consumer Financial
Protection Bureau (CFPB) is issuing this
policy statement on No-Action Letters
(Policy), which is intended to further
objectives under section 1021 of the
Consumer Financial Protection Act.
DATES: This policy statement is
applicable on January 10, 2025.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or at: https://reginquiries.
consumerfinance.gov/. If you require
this document in an alternative
electronic format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Overview
The CFPB is accepting applications
for No-Action Letters (‘‘NALs’’), as set
forth in the policy statement below and
subject to Conditions to Promote
Innovation, Competition, Ethics and
Transparency (‘‘the Conditions’’). The
Conditions would be incorporated into
individual NALs and serve several
purposes.
To summarize the Conditions, they
are first designed to ensure that NALs
promote innovations that solve unmet
needs in markets for consumer financial
products and services. Minor
adjustments to existing products, or
products that are designed to take
advantage of gaps in laws rather than
bringing new offerings to market, do not
confer significant enough benefit on
consumers to warrant the expenditure of
government resources necessary to issue
and monitor a NAL. Granting Letters in
such circumstances misallocates
government resources towards
advantaging slight variations of what is
essentially the same product that is
currently available in the market. The
Conditions therefore aim to enable
innovations that solve real problems
that consumers face in financial
markets.
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Agencies
- CONSUMER FINANCIAL PROTECTION BUREAU
[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]
=======================================================================
-----------------------------------------------------------------------
CONSUMER FINANCIAL PROTECTION BUREAU
Environmental Assessment and Finding of No Significant Impact
AGENCY: Consumer Financial Protection Bureau.
ACTION: Notice.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\3\ See 88 FR 30388 (May 11, 2023).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\4\ For a discussion of the potential impacts of the proposed
rule, see 88 FR 30388 at 30417-28.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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/#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