Ask Pablo: Paper or Plastic? Spending Cash vs Credit Cards


Image credit: Andres Rueda, used under Creative Commons license.
Dear Pablo: Is it more sustainable to use cash or credit cards to pay for transactions?

The correlation between consumerism and environmental impact goes without saying but aside from the embodied impact of our purchases, what about the transaction itself? Each year vast quantities of paper money and coins are produced for use in commerce but increasingly people are paying with plastic. What are the relative impacts of paper money and credit card transactions? This week we will find out and we will also explore some emerging alternatives.

What Is The Impact Of Physical Money?


Physical money certainly has a tangible impact. We explored this in a recent Ask Pablo article in which I answered the question " Do $1 Coins Have A Smaller Footprint Than $1 Bills?" in which we found the US $1 banknotes have 3 grams of embodied greenhouse gas emissions which coins have around 15 grams. But, they also last 17 times longer and are fully recyclable, so the full green story is more complicated.

What Is The Impact Of Credit Cards?

Most credit cards are made from PVC, which is not the most environmentally friendly plastic, but their relatively low weight (5.07 grams) and the fact that they are used for a long time (months to years) over hundreds, if not thousands of transactions makes their per-transaction impact virtually zero. In aggregate of course, their manufacturing does have a tangible effect, 21,000 tons of CO2-equivalents to be exact, according to research done by TruCert Ltd., a British-based consulting firm. The credit card industry could have a meaningful impact by collectively switching away from PVC, as many other industries already have. Of course, some companies have already switched.

The real impact of credit cards is behind the scenes, and while there are several articles on the question of paper vs. plastic none that I have found include this impact. Each transaction travels through wires or is beamed to satellites, destined for a data center. Data centers are notoriously energy-intensive. Nearly all of the energy that goes into the servers turns into waste heat, which needs to be removed by massive chillers. The impact of data centers can be lessened by powering down idle servers, co-locating the facility to sources of renewable energy and water-source (hydrothermal) cooling.

While the overall impact of data centers is known, it is difficult to ascertain a per-transaction amount. Because the transaction data travels through the same wires, routers, switches and similar database servers we can assume it to be similar, or slightly higher than a Google search (1-10 grams). At 10,000 transactions per second (globally), the annual greenhouse gas emissions from global credit card use is at least 3,153,600 metric tons of CO2-equivalents! That is almost equivalent to the annual emissions of the average US coal-fired power plant.

Beyond the data centers there are even more impacts of credit card transactions. Many people are still receiving paper statements in the mail and sending paper checks to pay for their bill. For example, if your monthly statement is 5 pages, the greenhouse gas impact is the same as a handful of online transactions. Of course the impact of paper goes well beyond greenhouse gas emissions, with potential quantifiable impacts including habitat loss, air and water pollution, and waste management. This can be easily remedied by switching to paperless statements and linking your checking account to your credit card account for electronic payments. Speaking of paper, receipts also deserve a mention. While the volume of paper is smaller than that of the paper statements, there are other impacts of credit card receipts, like the fact that many of them contain high levels of Bisphenol A.

What Are Some Alternatives To Credit Cards And Cash? Are They Really Better?

Google recently unveiled its new Google Wallet, an app that allows you to pay using only your mobile phone at any credit card terminal with PayPass. This capability is currently only available on the Nexus S 4G. While Google Wallet eliminates the need for a plastic credit card, it does nothing to reduce the remaining impact of credit card transactions.

The trend in recent years has been towards more and more electronic transactions and that is expected to continue, relegating cash to the nostalgia bin along with pay phones and snail mail. However, it does appear that cash, especially $1 coins have the environmental upper hand This is because of the coins' durability and ease of recycling once they're out of circulation. Cash has the added benefit of making you more aware of your purchases because you are handing over something physical rather than just swiping a card. This awareness has the potential of reducing your consumption. It is not realistic to think that the trend toward plastic will reverse itself, so the future environmental impact of financial transactions will be dependent on our ability to drastically improve data center efficiency. The good news is that the data center industry is making incremental improvements through increased efficiency, better data center management, and locating data centers near sources of clean energy.

Pablo Päster is a weekly columnist for TreeHugger.com and Principal Environmental Consultant at Hara Software. Send your questions to Pablo(at)TreeHugger.com or submit the via this form and connect to his RSS feed.
More TreeHugger Articles On Green Spending:
Green Credit Cards: Get Your Money's Worth
Discover Launches First U.S. "Biodegradeable" Credit Card
From the Just What We Needed Dept: A Credit Card Holder with Button-Activated Card Selection

Tags: Alternative Energy | Carbon Dioxide | Carbon Footprint | Coal | Consumerism | Electricity | Energy Efficiency | Pollution | Waste

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