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Do the environment a favor: use cash

Categories : Cash is efficient
September 23, 2016
Tags : Alternative modes/methods of payment, Banknote/Note, Bitcoin, Blockchain, Durability
The hidden cost of electronic payments is often ignored - but it shouldn't.
Communication Team / Equipo de Comunicación

Critics of cash often cite environmental concerns as one of the reasons why digital payment methods are “greener”, but they fail to look beyond false appearances.

In their study “Bitcoin Mining and its Energy Footprint”, Karl J. O’Dwyer and David Malone of the National University of Ireland found that the bitcoin network’s energy consumption was probably equal to that of all of Ireland, around 3 GW. This was in 2014. What would happen if bitcoin became a more universal payment method? Fabrice Flipo and Michel Berne estimate that the monetary mass in circulation today is equal to 11 trillion dollars. If that were all in bitcoins, it would require over 4,000 GW of energy to power them – or twice the energy consumption of the entire United States.

Processing bitcoins also requires a large financial investment. The processing cost of each bitcoin is  $60, even when the environmental conditions are favorable and the data centers’ energy costs are low (as in Iceland).

Cash, on the other hand, might cost the environment when produced, but it also gives back once a banknote’s lifecycle comes to an end. For example, in Ethiopia old notes are used to make bricks for housing. In South Africa, the Rands are printed on recycled banknote paper. In China, the energy recovered from burning banknotes powers the city of Yancheng. In fact, one truckload of Yuans can produce 30,000 kilowatt hours (one household consumes 100 kilowatt hours in one month). In fact, “one ton of banknotes can generate about 660 kWh of electricity, saving roughly 4,000 tons of coal each year” (NCR).

With the growing amount of connected objects and the Internet of Things, it is necessary to review the hidden yet very present environmental costs of digital payments. In France today, 15% of the country’s electricity is consumed by electronic devices, but that percentage is expected to skyrocket with our world’s growing connectedness.

To read the Nouvel Observateur’s original article [in French], please click here.