By Anders Lorenzen
When you enter a shop to buy a product, do you ever wonder what the carbon footprint is of the money you spend? We’re not talking about the carbon footprint of the product you’re buying, merely the carbon footprint of the money you hand over. It is something that many of us, quite likely, don’t usher a thought about, but the money itself has to be produced and therefore does have an impact. The carbon footprint of the products we consume is, of course, a whole different story.
Last month the Bank of England announced their new £5 and £10 notes, and data from the central bank combined with analysis by the Carbon Trust have found a lowering of the notes carbon footprints due to the fact they’re made from polymer instead of paper. This presents a carbon reduction of 16% & 8% for £5 and £10 notes, respectively, as well as increasing their longevity. This means the Bank of England would have to print and replace old notes less frequently.
While this, of course, is a step that should be welcomed, some might understandably ask the question, does it really matter in a world where, increasingly, we spend our money digitally? The short answer is probably not.
While in many rural communities, physical money which we commonly know as cash, is still preferred, the direction of travel in a more globalised economy is that of a cashless society. But just how long that will take is still an open question, and whether cash will see a comeback is also up for dispute.
But based on those scenarios, we really need to look at the carbon footprint from digital money. The carbon insensitivity of a banknote is becoming less and less important as usage shrinks. What we really ought to look at is the carbon footprint of how we spend money digitally. Whether that is by using our debit or credit card to pay for stuff in shops, buying stuff online, using services like PayPal or even adopting cryptocurrencies like Bitcoin and Ethereum. The most likely scenario is that how we spend money in the future would take place on a range of different platforms. But in essence, it will likely be data in the shape digits jumping from computer screen to computer screen, and from server to server. And that is energy intensive.
Therefore it is important we calculate how spending money digitally will impact carbon emissions. But when it comes to that, the question quickly becomes complex. More data and transparency on this would be helpful. But put simply, to calculate the carbon footprint of digital currency it really does depend on how green the data centres are which power your financial institution, or which online retailer or other financial services you use. The more we adopt online methods for using and handling our money the more computer power is needed, which in turn means increased energy usage.
Cryptocurrencies are still in their early stages, but how they’re produced (also called mining) is not good news for the climate as it is extremely energy intensive.
But the bottom line here is that extra energy demand is not in itself a bad thing, it is how that extra energy is generated that is important. Some of the world’s largest tech companies like Facebook and Apple are greening their data centres. This would need to happen in the financial world too, to lower the carbon footprint of digital economics. As money transitions from cash to digital, the issue of how financial institutions are powered will only increase in importance.