ECB Highlights Environmental Impact of Banknotes
The European Central Bank (ECB) has highlighted the environmental impact of traditional banknotes and called for measures to reduce it. In a recent report, the ECB outlined how the physical infrastructure involved in supporting eurozone cash, from raw material acquisition to banknote distribution, affects the environment. According to the European Commission’s methodology, the environmental impact of a typical euro area citizen’s annual cash consumption is equivalent to driving a standard car for eight kilometers. The ECB acknowledged that while the impact of paying with euro banknotes is low, it remains committed to further reducing it and developing more environmentally friendly banknotes.
Main Sources of Environmental Impact
The core sources of environmental impact related to banknotes include powering ATMs (37%), transportation (35%), processing during distribution (10%), paper manufacturing and authentication at point of sale (14%). Despite efforts towards digital payments, cash remains the most widely used form of payment in the euro area. Over half of payments in shops and restaurants in Europe are still made with coins or banknotes. However, the ECB has clarified that its exploration of a digital euro is not intended to eliminate cash altogether.
Bitcoin’s Energy Consumption Compared
The ECB has repeatedly emphasized that Bitcoin consumes far more energy than European cash. In a previous report, the central bank warned that Bitcoin’s energy consumption rivals that of small and mid-sized countries such as Spain and the Netherlands. The ECB has also stated that Bitcoin does not meet the criteria of a “currency” due to its volatility and lack of adoption as a medium of exchange. Bitcoin’s high energy consumption is primarily due to its proof-of-work consensus mechanism used to maintain transaction decentralization. Survey data suggests that over half of the Bitcoin mining industry is powered by renewable energy.
Hot Take: Environmental Impact of Euro Banknotes vs. Crypto
The European Central Bank (ECB) has released a report highlighting the minimal environmental impact of euro banknotes compared to other everyday products. While the impact is low, the ECB remains committed to reducing it further and developing more environmentally friendly banknotes. The core sources of environmental impact related to banknotes include powering ATMs, transportation, processing during distribution, paper manufacturing, and authentication at point of sale. Despite efforts towards digital payments, cash remains widely used in the euro area. In comparison, Bitcoin’s energy consumption is significantly higher than that of European cash, with the entire Bitcoin network consuming energy rivaling certain countries. The ECB has emphasized that Bitcoin does not meet the criteria of a currency and poses climate transition risks for the financial system.
By
By
By