In Sweden, which is famously on the way to becoming cash-free, you can find signs in shop windows that say ‘we don’t take cash because electronic payments are better for the environment’.
Since cash does require a certain amount of resource use for its production process and transportation, and since in general we’re encouraged to go paperless as much as we can, this idea may seem – at first, anyway – to make sense.
And if electronic money truly required only the modest amount of energy that goes into creating bank cards or whichever payment device is being employed, along with a bit more energy for moving the data around in cyberspace, then it would very likely be true.
Indeed, a recent study by the Dutch central bank seemed to back up the Swedish store owners’ assumptions. It investigated the ecological footprint generated by cash and compared it to that of electronic payments, and found that cash was the loser.
However, there’s a very important missing variable in the Dutch study: how the money comes into existence in the first place.
With cash, that’s pretty straightforward. The central bank creates cash and it then gets distributed to private banks. (Corresponding deductions are made to their ‘reserve accounts’ at the central bank. Then it’s put into ATMs.) Apart from the up-front ecological costs mentioned above there is nothing else to worry about.
Electronic money, in its current form anyway, is a very different beast. And since it makes up about 97% of money in circulation, it deserves serious attention.
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