Where are Java final local variables stored?

Take the following example:

public void init() {
    final Environment env = new Environment();
    Runtime.getRuntime().addShutdownHook(new Thread() {
        public void run() {
             env.close();
        }
     });
}

Firstly, where is env stored? Is it:

• copied by the compiler into a hidden member variable of the inner class that references it
• copied to, and referenced on, the heap
• left on the stack and somehow referenced there
• something else

My guess is the first option.

Secondly, do any performance issues that arise from doing this (rather than simply creating env as a member variable of the class and referencing it as such) particularly if you are creating large numbers of such inner class constructs that reference final local variables.