ECB Identifies Banknote Environmental Impact

The European Central Bank (ECB) has issued the findings of its Product Environment Footprint (PEF) study, which focuses on the creation and life cycle of banknotes through to their disposal when they become unfit to circulate.

The ECB wanted to understand the potential end-to-end environmental impact of banknotes as a payment instrument, to help further identify aspects of the lifecycle that can be targeted to reduce the environmental impact of banknotes.

The output of the PEF was a single overall score for the average annual value of cash payments for a Euro Area Citizen (EAC) in 2019, 101 micro points. This is the equivalent of driving a standard car 8 km. The ECB put that in context by comparing it with buying a cotton T shirt and then washing it once a week for a year, which has an EAC equivalent of 55 km, or the manufacture of 71 one and a half litre bottles of water, the average consumption of a European Union (EU) citizen in a year, which is 272 km.

As with other Life Cycle Assessments (LCAs), this PEF found that the energy consumption of automated teller machines (ATMs) and transportation had the biggest impact, followed by the processing of banknotes by National Central Banks, paper manufacturing and the authentication of banknotes in shops. This last finding is different from other LCAs.

While ATMs were responsible for 37% of the total impact, ATM manufacturers, working with credit institutions, have reduced the contribution of ATMs to the PEF score by 35% between 2004 and 2019. The transportation of banknotes accounts for 35% of the total, and considerable work has been done on transport optimisation. Further work is going on, including looking at the use of sustainable fuels.

Process activities in the distribution phase of the life cycle contributed 10%, paper manufacture 9% and authentication at the point of sale (POS) 5%. The ECB implemented the sustainable cotton programme in 2014, requiring the adoption of sustainable cotton fibres in paper making and banned the disposal of unfit banknotes at the end of their lives in landfill sites.

The ECB used version 2.0 of the European Commission’s PEF methodology. This is an LCA-based methodology that covers 16 environmental impact categories, including climate change owing to greenhouse gas emissions, ozone depletion, land and water use and resource depletion. It is a more detailed approach than other LCA methodologies, which only consider one or few impact categories (eg. climate change owing to greenhouse gas emissions).

The report can be found at: www.ecb.europa.eu/pub/pubbydate/2023/html/ecb.pefreport20231281e945e7aa.en.html