Ecology: the carbon footprint of payment means in a cashless economy

Amongst the many arguments presented by anti-cash supporters, the environmental balance of banknotes. Would a cashless world better serve the planet’s interest? Not necessarily: banknotes have excellent footprints due to their durability and recyclability, while cashless payment systems simply hide their own.

Cash is manufactured therefore it is tangible. Like anything else that comes out of a factory, it is quickly associated with a carbon footprint. Proponents of a cashless world therefore argue that getting rid of paper currency would be environmentally sound and delete the associated carbon footprint. Slate Nina Rastogi writes: “A $5 bill typically lasts just 16 months before it wears down so much that it's taken out of circulation. (Other denominations can go for longer.) The currency itself is made from a blend of cotton and linen—products that may be renewable but whose cultivation requires a lot of land and other resources.” Added to the direct manufacturing footprint, come the indirect sources of pollution associated with cash: its transport, its securing and distribution, etc. Cashless supporters consider that the suppression of banknotes would simply delete the carbon footprint, but scrutiny of the alternative shows that a cashless world would in fact increase the footprint.
Cashless payment systems use their virtual nature to hide their own carbon footprint, but that doesn’t mean it isn’t there, as the growing share of cashless payments shows. “One of these evolutions is the slow demise of paper money, as it is gradually replaced with electronic payment methods. But it turns out that, on the environmental level, new isn’t necessarily better. With the disappearance of the old-school banknote, comes a massive energy bill”, writes Alexander Pietro for BrooWaha. Cashless payments rely on large networks of server farms, with very high levels of energy consumption.
In the past decades, the overall level has skyrocketed to over 400 terawatt hours of electricity, equaling about 3% of world demand, with the steady and strong increase of data to be stored. “Massive as data center energy use may already be, this is nothing to what lies in store, analysts warn. Ian Bitterlin, Britain’s foremost data center expert and a visiting professor at the University of Leeds, says the amount of energy used by data centers is doubling every four years – despite the innovations in hardware that massively increase their capacity to store data”, says Tom Bawden, from the Independent . In addition to server farms, the banking and payment networks rely on many environmentally unfriendly devices and systems, such as card terminals, copper-hungry cables, batteries, etc., further depleting non-renewable resources such as oil, rare metals and copper. The guardian writes : “Environmental costs associated with rare earth metals are quite significant. First, you have to extract them. Then, you have to purify them. After they're distributed into technology, they often end up in landfills because it is less costly to simply toss equipment than it is to recycle it”. Copper demand is soaring at new levels, with total world production at about 18 million metric tons per year. Copper demand is increasing by more than 575,000 tons annually and accelerating.
Finally, banknote technology is just as prone to environmental upgrades as any other technology. As research moves forward, banknotes will remain intact for longer periods, and gradually decrease the logistics associated with replacing them. The ECB, among other central banks, subsidizes research and development to improve banknote performance and systematically promotes the recycling of Euro banknotes: “The possibility of recycling euro banknotes enables credit institutions and other professional cash handlers to perform their role in the currency supply in a more effective and more cost-efficient manner. In order to avoid competitive distortions and to establish harmonised standards on banknote recycling within the euro area, the Eurosystem has agreed on a general framework to be applied for the entire euro area.”
Bills are printed on linen-based paper that is high in quality, Wonderopolis writes. They are meant to wear well and be used for a long time. Over time and through repeated use by many people and machines, though, they will eventually break down and wear out. When bills get to the point where they tear easily, they may be recycled.” In the United States, the Federal Reserve also pay attention to what the worn-out currency becomes: “So far, the Federal Reserve's efforts have involved the use of old bills in roofing tiles, particle board, fuel pellets, stationery, packing material and artwork”, The New York Times reports.
The rapidly-changing world, headed towards globalized virtualization, has quickly taught private companies to hide their carbon footprint, and blame previous systems for higher ones, so as to accelerate the transaction which they benefit. Decentralizing pollution does not amount to suppressing it, and its discrete nature will even give it space to grow.

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The cashless society from an ethical point of view

The debate about the move towards a cashless society has been at the center of the scene for several years, now. Various angles have been taken by economists, politicians, banking institutions and sociologists. Beyond the technicalities of the debate, lies the question of freedom, of inter-citizen solidarity and of governmental responsibility. The debate cannot remain in the hands of financial specialists, it is first and foremost an ethical, political and societal issue.

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