(The one exception to "nothing gets decoded incorrectly" is that PYTHONCOERCECLOCALE itself is always interpreted as an ASCII field: the values that it checks for are actually ASCII byte sequences, not Unicode code points.

The documentation could definitely be much clearer on that point though, as even in the PEP it's only implied by the final paragraph in https://www.python.org/dev/peps/pep-0538/#legacy-c-locale-coercion-in-the-standalone-python-interpreter-binary which is mostly talking about the fact that this particular environment variable is still checked, even if you pass the -I or -E command line options.