What would a cashless economy mean for the environment?

Human-influenced global warming is a hot topic. With protests and sit-ins sprouting up around the world, people are worried. Progress, now, would be a move towards more environmentally sustainable, ‘green’ practices in everything that we do. There is fairly solid consensus on this, at least among many Western governments, the European Union, the United Nations, and innumerable non-state actors. However, when it comes to the digital payments revolution which is making life so much quicker and easier, many people fall victim to a failure of intuition. The belief is that removing cash from the economy would benefit the environment, when in fact, the reverse is true.

Cash, we all know, wears out. Intuitively many people see this as a sign that it is less than sustainable, and therefore, harmful to the environment. This combined with the notable inefficiencies of cash, such as transportation costs, amounting to energy consumption, logistics, reprinting, even the fight against forgery– give cash a common-sense environmental price tag.

On the other hand, digital payment is contactless, digital, invisible – intuitively it is therefore without cost to the environment.

It wouldn’t be news to tell you that our intuitions are flawed at the best of times. The truth is that digital payments do not do much good for the planet at all.

Bank cards are only the beginning of the problem. The PVC that constitutes them is a plastic made from oil which has been extracted at well-documented cost to mother nature. It is also not only an unfavourable recycling material, PVCA, it is made quite challenging for consumers to even try to recycle, with many recycling firms refusing to take items in as the material is costly to process.

Cash, in contrast, is made of sustainable materials like cotton and linen, or even plastic polymers that are, by regulation of the central banks which commission them, far kinder to the planet. Given the direct monetary value of cash, people are almost certainly going to bring worn out notes to a bank for exchange, from which point the notes can be processed in an environmentally responsible way.

Next, to argue that the transportation, protection, and reproduction of cash do not themselves have a counterpart in the apparatus that governs digital payments is to really have your eyes belligerently closed.

The mechanism which allows your contactless payments to be processed relies on a many-layered, energy-devouring network of technologies. Starting off, of course, with your humble pocket supercomputer, the smart phone.

A strong argument can be made against the continued use of smart phones generally. The catastrophic damage that the components’ precious metal mining, refining, and manufacture cause is staggering. But to lay this problem solely at the feet of digital payments would be uncharitable to the scale of the smart phone’s wickedness and industry.

The applications through which mobile phone payments are made, however, and the means by which debit cards function, are dependent on a massive distribution of communication networks, data centres, and servers. All of which have huge energy demands.

At the current rate of expansion, the energy cost of data is doubling every four years. This is a fact that exist in spite of technological improvements in efficiency and capacity, according to Ian Bitterlin of Leeds University, one of the foremost experts in data centres.

“If we carry on going the way we have been it would become unsustainable – this level of data centre growth is not sustainable beyond the next 10 to 15 years. The question is, what are we going to do about it?” Professor Bitterlin said.

Then when we consider the colossal deluge of technological detritus that comes from this infrastructure, and where it ends up – the landfill – we start to get an idea of the degrees to which our intuitions are letting us down. According to a United Nations report, 50 million tons of E-waste were sent to landfills in 2018. This is up 20 percent from the previous year.

Part of the problem is that the trend for built-in obsolescence is itself on the rise. While products are becoming more competitively priced, they are also, seemingly by design – living out shorter functional lifespans. Much like the story of the 1000-hour light bulb, now our phones and computers are also only designed to last long enough to see the next generation of the model come around the corner to taunt us with the latest features.

The digital economy, inevitably, suffers from this systemic sickness of capitalism. As a result, to expect the environmental cost of non-cash payments and the digital economic infrastructure to go down is to be in denial.

Cash has its own problems. It is expensive, and governments, financial companies, and bankers find it awkward and frictional to manage. However, these costs are only going to go down with innovation, and it is, after inspection, a sustainable product. The same, most certainly, cannot be said for e-payments devices.

Go Further

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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