Digital Euro, greener than cash. But not more convenient for everyone

The introduction of the digital euro can be the ‘brilliant but obvious solution’ capable of reducing the carbon footprint linked to the use of cash, while at the same time guaranteeing the privacy in payments that only cash can provide, without the potential distortions that have so far been generated by cash, starting with tax evasion.

The digital euro is a ‘central bank digital currency’ issued by the European Central Bank (ECB) and intended for the general public. It will be exactly like cash, only in a digital version. Each digital euro will therefore be guaranteed directly by the ECB.

According to a recent study by the European Central Bank, the environmental footprint of euro banknotes used as a means of payment by one person is equivalent to eight kilometres travelled by car in one year. In more detail, the survey shows that the average environmental footprint of banknote payments in 2019 is 101 microdots per euro area citizen. This is the equivalent of 8 km travelled by car, or 0.01% of the total environmental impact of a European citizen's annual consumption activities.

The main factors contributing to the environmental footprint of euro banknotes, the study continues, are energy consumption by ATMs and transport, followed by processing activities by the National Central Banks, paper manufacturing and checking the authenticity of banknotes at retail outlets.

“The Eurosystem is committed to making euro banknotes as environmentally friendly as possible, while ensuring the wide availability and acceptance of cash,” ECB Executive Board member Piero Cipollone recently declared.

Cashless payments are a step forward compared to cash and contribute to the ecological transition: Italy is second in Europe, after Germany, for the total CO₂ emissions generated by cash payments, with more than 160.8 thousand tonnes of CO₂, about 2.7 kg per inhabitant.

According to estimates elaborated by The European House-Ambrosetti as part of the survey of merchants conducted by the Community Cashless Society, the cashless payment has a 21% lower carbon footprint than cash.

Mr Cipollone, in a speech to the Committee on Economic and Monetary Affairs of the European Parliament, explained that “a digital euro would be a European means of payment that could be used free of charge for any digital payment, in any country of the euro area. Together with cash, it would preserve the freedom of European citizens to use a public payment instrument. However, there is a risk that this freedom would be taken for granted. In my previous role, I received countless letters from mayors, for example those of mountain communities, who were concerned about the ever-increasing distances to the ATMs nearest to them.”

The B-side of the fight against cash is in fact the so-called banking desertification, i.e. the progressive reduction of bank branches in the territory, which primarily harms the less digitally accustomed people such as the elderly.

Cash and the digital euro have the same objective: to ensure that everyone, regardless of income, can make payments in any situation in everyday life.

The environmental issue is also well understood by Bankitalia's technicians. Luigi Cannari, head of the Bank of Italy's Market and Payment Systems Department, in a recent speech on ‘Innovation, green, digital for business competitiveness’ stressed that “in the design of the digital euro, the ecological footprint of the European payment system is being considered, with consequent benefits in terms of the environmental impact of payment services. The Bank of Italy, in addition to actively contributing to the work of the digital euro retail project, makes available to the Eurosystem its significant experience as a provider of infrastructure services also in the field of wholesale payments, where the evolution of technology, in particular distributed ledger technology (DLT), broadens the range of applications for the economy and finance.” The ball is in the hands of the next European Parliament. The most optimistic think that the digital euro could become a reality as early as 2026, the less optimistic in 2028.