Within the lifecycle of a penny or dollar, waste is produced at multiple junctions. Moreover, end-user equipment like ATMs adds to the overall energy consumption. Incinerated waste and electricity produced from non-renewable resources contribute to climate change. However, over the last decade, card-based payments have taken center stage, and while one may have expected that our old woes of adding to global waste and emissions would have disappeared, they haven’t. These “digitally advanced” methods are only making the planet hotter.
Unfortunately, in-depth research into the effects of digital payments on the environment is scarce. Current analysis relies on a study done in the Netherlands on the environmental impact of debit card transactions. By analyzing the life cycle of a debit card and observing the surrounding ecosystem, the study found that most consumer-facing equipment, such as the card and terminal, contributed to 90% of the environmental impact.
Unlike previous speculation, data centers are inconspicuous relative to the waste and emissions produced by consumer-facing parts of the ecosystem. The research also found that in the Netherlands, the impact of a single debit card transaction was equal to 3.78 grams of CO2-equivalents, which is the same as “leaving on a low energy 8W light bulb for one and a half hours.”
Unfortunately, even if we were to make a radical shift towards greener payment cards or alternative methods like card-not-present payments, we wouldn’t be able to effectively cut down on the financial industry’s impact on Earth. The problem goes even deeper.
Lotfi Belkhir and Ahmed Elmeligi show in their research that smartphones are the most harmful consumer-facing electronic product currently being used by the payments and financial ecosystem. This is largely because of two reasons. Firstly, the supply chain behind smartphone manufacturing and retail is built upon emission-heavy mining and shipping processes. Secondly, these processes have to be repeated often, because with the rising demand for smartphones, their short lifespans continue to necessitate frequent buying, hence adding to more waste.
EEE or Electrical or Electronic Equipment are the primary source of e-waste. In 2021, the world generated 57.4 million tonnes of e-waste. That amount of waste outweighs the Great Wall of China. Sadly, our great wall of waste does nothing to add to the aesthetics of our world and does everything to harm it. Americans throw out over 350,000 cell phones and 120,000 laptops every day. A study by WHO on e-waste found the US to be amongst the biggest e-waste producers in the Americas. According to the UN, about 10% to 40% of all e-waste in America is exported for dismantling. The picture below shows the contribution each country in the Americas makes to e-waste.
But crypto could solve this:
We are moving away from cards and cash, into the brave new world of cryptocurrency – that would be real if it didn’t take so much energy to keep digital currencies up and running. Sabrina Rochemont shared the image below in her research on the environmental effects of payment methods. The grid in the image paints a fuller picture of how each method performs relative to others in terms of its energy consumption, recyclability, emissions, and raw material use.
Turns out, I lied, and this is 5 charts. The final one (see below) shows you the annual energy consumption of bitcoin in comparison to a bunch of countries. It seems that it takes the same amount of energy to keep the lights on in Bangladesh as it does to keep the mining machines humming for Bitcoin.
Apples to Oranges comparisons aside, the energy consumption of the mining industry is huge. According to Jared Huffman, a recent study on cryptocurrency mining operations in upstate New York shows that these activities have pushed up annual electric bills by about $165 million for small businesses and $79 million for individuals. Moreover, congressman Jared Huffman (D-Calif.) and U.S. Senators Elizabeth Warren (D-Mass), Sheldon Whitehouse (D-R.I.), Edward J. Markey (D-Mass.) and Jeff Merkley (D-Ore.) and Representative Rashida Tlaib (D-Mich.) have sent a letter which “highlights the effects of cryptocurrency mining on the environment”. Their findings reveal that the industry is responsible for a significant amount of emissions.
So, what is going to be our magic cure-all to decades of ignoring our impact on the planet? So far, we have none. Unsurprisingly, the only solution is the old one: switching to renewable sources for our energy demands, asking our organizations to switch to greener practices, and consuming mindfully.
If you care about the planet and want to find out more, sign up for our upcoming Banking on the Planet conference, where we will dive deeper into how we can use data to measure climate risks and their mitigation.