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It's known that bitcoin has a high carbon footprint [1].

Some have started to compare the environmental footprint of a bitcoin transaction and a standard visa transaction [2].

What is the carbon footprint of traditional cash? Is cash the most sustainable money?

[1]: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week

[2]: A Single Bitcoin Transaction Takes Thousands of Times More Energy Than a Credit Card Swipe

  • How would you measure this? Do you want to consider the carbon footprint of the nation-state w/ its military force that is required to lend value to fiat currency? – Jean-Paul Calderone Nov 8 '17 at 12:08
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    I suppose you would need to figure out the carbon footprint of the manufacture of the actual physical cash and then add to that the carbon footprint of its transportation and storage. Metal coins would seem to have a larger initial carbon footprint over paper money but then paper money tends to have other materials such as plastics embedded within it. Transportation would be a factor as large amounts of money are heavy. – Richard Chambers Nov 8 '17 at 13:29
  • @Jean-PaulCalderone: I think it reasonable of the questioner to hope that answers will analyse such considerations and give reasons why one should or should not take them into account. There may then still be an element of opinion as to whether to do so, but an open-minded person should understand the problem better and be able to make a better decision. – PJTraill Nov 15 '17 at 11:48
  • Indeed, the understanding of the problem requires an analysis of how to measure or estimate it in a relevant manner. – Martin Monperrus Nov 16 '17 at 9:14
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Very low.

I'm going to use manufacturing costs as a proxy for environmental footprint. This is realistic up to the point that ignores extrinsic costs, and ignores financial costs. E.g. making the paper can be done with essentially no carbon foot print, or a fairly large one. In general I regard costs as being a good first order proxy, unless you can show some unusual circumstances.

The bitcoin calculations have to be redone on a transactional basis. Suppose that this was cheap and only took a kWh of electricity. Then the cost per transaction, ignoring equipment would be on the close order of 10 cents.

A debit card transaction typically costs the merchant 15 to 35 cents. The biggest part of this is to the company that runs the database. The non-material costs are a large fraction of this. (Where my proxy breaks down...) E.g. Database, data centre, are all manufactures that need to be amortized over all the transacations, but advertising, marketing both to customers and to merchants, dispute handling. I will arbitrarily call the cost of this transaction 1/2 of the merchant fee at 10-20 cents.

Credit cards, for reasons I don't know, are much more expensive for the merchant. Partly fraud, partly borrowed money, mostly making credit card companies wealthy. There is no intrinsic reason for it to be different from debit card. This difference is another example of monetary cost not being a good proxy for footprint.

While a dollar bill costs money to make, it will be used in hundreds of transactions before being retired as worn out. And a 20 dollar bill costs about the same as a one dollar bill to make. (The Fed's website says 5 to 20 cents for a paper bill. The $50 is the most expensive to produce.)

Reference: https://www.federalreserve.gov/faqs/currency_12771.htm

Bills last 5-20 years, with higher denominations lasting longer, as they are often used to 'store' value.

Figure that a bill on the average is taken out of a bank machine, and likely spent within two weeks. The shop keeper deposits it. So there is two transactions. Buyer to shop keeper, shopkeeper to bank. If it's a smaller bill, it has about a 50% chance of being used for making change, I'm guessing. So call it 5 transactions per month. 5 years then means a bill is used in about 300 transactions. This is a sloppy estimate. Could be as low as 100. Might be as much as a thousand.

Coins often cost more to make than their face value (especially true for small value coins) but a coin will be used for thousands of transactions. The penny costs 1.6 c to make, the nickle 8.5 c, according to an article in the washingtoon post. The others cost less to make than their face value.

Reference: https://www.washingtonpost.com/news/wonk/wp/2014/12/15/it-cost-1-7-cents-to-make-a-penny-this-year-and-8-cents-to-make-a-nickel/?utm_term=.5fb440d6c1c2

According to the Royal Mint, british coins have an average life span of 40 years. No details about how they got this figure. In particular I don't know if they correct for the increased number of coins in circulation.

http://www.royalmint.com/help/help/life-expectancy-of-a-coin

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    Can you cite the article and the fed website? – LShaver Nov 27 '17 at 17:13
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Very high.

Cash needs to be transported. Transportation is the biggest evil. For example, it is almost always better to work remotely than to travel to your workplace (unless you live very near; most don't). Card payments are electronic. Nobody needs to haul around the cards in a minivan.

Not only that, but cash use reduces; the need to do regular transportation to haul a diminishing amount of cash doesn't. In contrast, Moore's law is continuously reducing the environmental impact of computer systems. A server of today is more powerful than a server of yesterday, and uses less electricity.

Newspaper source: https://www.bloomberg.com/news/articles/2018-10-16/pick-card-payments-over-cash-and-the-environment-will-thank-you and original source: https://www.dnb.nl/binaries/Working%20paper%20No.%20610_tcm46-379441.pdf

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(This is not meant to be a full answer but rather a complement to the other answers).

When evaluating the carbon footprint of any form of money you don't only need to look at the economic and environmental cost of manufacturing units of currency (cash), specially in occidental societies who are converging towards chashless economies. Instad, you need to look at the cost of securing accounts and transactions.

In decentralized, digital networks (eg. bitcoin) the security cost is mainly given by the cost of the consensus protocol (ie. mining—but there are other more environmental-friendly alternatives like Proof-of-stake).

With fiat money, the security cost relates to:

  • Defense (ie. maintaining an army that protects your economy from external threats as well as the militar and political cost to keep a "healthy" international trade balance and avoid an international crisis that would plunge the currency).
  • The coercive power required to keep a stable institutional system (without which central banks wouldn't work)
  • Security costs required to protect bank vaults and the data centers that handle electronic transactions and keep customer account records.
  • The cost of transporting cash, banknotes, etc., securely.

I'd love to put some numbers to all of this, but that would probably take a lot of time.

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