An International Indicator-Based Assessment of the Climate Impact of Cash Payments

Money and payments are central to modern economies and societies, yet there are increasing concerns about the environmental impacts of various payment services, particularly from a climate and energy perspective. This paper addresses the following research questions: What are the main factors affecting the climate impact of cash and how does the climate impact of cash compare across different countries? This is the first paper that presents a conceptual model outlining the main factors affecting the climate impact of cash payments and that tests this model on 34 countries. The paper analyses six indicators that affect the climate impact of cash and analyses to what extent each of these factors plays a role for the selected countries. Our model shows that the main factors indicating the climate impact from cash payments are the share of renewable and low-carbon energy sources used in a country, the share of people living in urban regions and the number of ATMs per capita, which is directly linked to energy and carbon emissions. Other factors that play a role are the per capita CO2 emissions, the carbon intensity of road transport and the amount of cash in circulation. We then use this model to rank the countries based on how cash is expected to influence climate impact. The paper proposes policy recommendations for governmental and private banking institutions as well as countries aiming to reduce the climate impact of cash payments.