It is not possible to calculate the total carbon footprint of the current financial system very exactly, and estimates are all over the map. However there can be little doubt that the traditional banking system consumes a lot more energy than even Bitcoin, which is far and away the biggest crypto energy hog. Sydney-based civil engineer and crypto expert Hass McCook had an entertaining, thoughtprovoking go at it in Bitcoin Magazine recently, concluding that Bitcoin emits less than 5% of the legacy finance sector’s carbon emissions.
Not only is the carbon footprint of the existing banking system staggering; a whole lot of it is burned for nothing. $6.6 trillion in foreign exchange, for instance—an amount that trades hands, not every year, or every month or week, but every single day—is basically casino gambling, an incessant, frantic electricity-torching global furnace that produces nothing; nothing edible, nothing interesting, nothing to improve efficiencies in any place or industry; it advances no area of study, generates no ideas, represents no goods, creates no future assets at all. Forex trading isn’t even remotely as useful as poop, which can at least be used to manure fields.
In any case the point of these estimates and conjectures is to at least begin to arrive at a rational understanding, based in fact, of the relative advantages between new and legacy systems.
So… how much plastic is in your wallet?
There are currently more than 24 billion active bank cards in the world, and more than six billion are manufactured each year as replacements and for new accounts, according to the ad-free trade industry journal, the Nilson Report. If you count expired ones, the number of plastic payment cards produced so far is in the hundreds of billions at the very least, almost all of them made with first-use PVC plastic. (Soberingly, just in my own wallet I also have plastic library cards, a AAA card and a health insurance card).
Each year the carbon footprint for bank cards amounts to about one megatonne of CO2 emissions, according to estimates from the French cybersecurity firm Thales. That’s for the 6-billion-plus new plastic cards alone: material, fabrication, packaging and transportation. It doesn’t count use of the cards, that is, emissions produced by the machinery and the massive settlement and accounting infrastructure that makes them usable. As Nic Carter wrote earlier this year, “Visa relies on ACH, Fedwire, SWIFT, the global correspondent banking system,” and a host of other institutions, each of which is responsible for its own global networks of servers, equipment and infrastructure. Nor does it count how much energy it takes to design, build, ship, install, and operate more than 3 million ATM machines globally; print and mail statements; run and maintain banking data centers; heat or cool the hundreds of thousands of bank offices and branches; transport millions of finance sector employees to work and back.
And none of this is even beginning to touch the deeper global political system of petrodollars undergirding the US dominance of global finance.
The ferocity and depth, the sheer totality, of banking’s hold on the modern world makes the whole of it impossible to see clearly. One wild little paper I found concluded that just one small change—investing in insulation and rooftop solar PV systems in ATMs in India—would save more than half a megatonne of CO2 emissions annually.
I’ve long been convinced that blockchain technology is a net boon to efforts to mitigate the climate crisis. But the problems created by the need for trade can’t just be whisked away by crypto overnight, not even by the most efficient state of the art proof-of-stake crypto systems or by the long-awaited Ethereum 2.0. Just for starters, even though digital wallets are already beginning to replace PVC cards, what of the insane environmental costs of the cell phones in which they are routinely carried??
When these questions can be taken up in a cool-headed and informed way, we’ll be getting somewhere, but there is a long way to go before that.
Boom Times is a blog about gambling, luck, money, greed, investing, blockchain technology and cryptocurrency.