The nether has a fixed point of where to draw fog which is at about 8 chunks away from the player but if you increase your render distance past this point then the game will run as if you are able to see the extra distance but then applying the fog effect over it, this practically has the effect of not changing the distance at which you can see stuff but continuing to use more resources for areas which should be unloaded and thus causing lag. This might be due to that change in the 1.16 betas that allowed render distance to be customised in the nether but was quickly reverted.

How to reproduce: enter nether with 8 chunk render distance and then change to maximum setting.

What should happen: render distance stays locked to 8 because you are in the nether.

What actually happens: game attempts to load terrain past your view distance causing higher resource usage.

You are able to see foliage unrender at different points when your render distance is between 8 and 12 aswell which shows a small visual aspect of this issue.