The European Central Bank (ECB) has conducted an assessment of the environmental footprint associated with the use of banknotes, identifying 16 different impact areas. This analysis highlighted energy efficiency as a key concern, similar to issues faced in cryptocurrency operations.
Cash remains the predominant payment method at retail points across the eurozone. The entire lifecycle of cash, encompassing production, distribution, and disposal, involves an extensive physical infrastructure that contributes to its environmental footprint.
The largest environmental impacts of banknotes stem from ATM energy use, accounting for 37% of the total, with transportation following closely at 35%. Additional factors include processing, paper manufacturing, authentication processes, among others. Since 2004, the ECB has been actively working to lessen these impacts. The ECB’s report states:
The energy consumption of ATMs, for instance, has already fallen by 35% between 2004 and 2019, even though ATMs have significantly increased in number. We are also looking into further reducing the impact of transportation.
Using the Product Environmental Footprint (PEF) methodology from the European Commission, the study found that the annual cash usage per eurozone citizen amounted to an average of 101 micropoints, equating to the environmental impact of driving 8 kilometers (about 4.6 miles). For comparison, the average EU citizen’s total annual impact is just over 1 million micropoints, akin to driving a car twice around the Earth, based on 2019 data.
This environmental footprint contrasts with that of Bitcoin mining, often measured in terms of vast quantities of water usage. However, the efficiency of crypto mining is improving, and its potential to reduce environmental impacts is expanding. Additionally, crypto mining offers unique opportunities for environmental benefits. Mining setups can utilize byproducts at fossil fuel sites, capture methane at landfills, and help stabilize energy grids.