A viral video circulating on social media suggests that Christine Lagarde, the president of the European Central Bank (ECB), is advocating for the abolition of cash to combat climate change. These claims have sparked significant debate online.
According to the social media posts, Lagarde intends to entirely replace physical cash with a digital euro, a concept that is currently under consideration by the ECB. However, these interpretations are misleading.
One prominent post on X (formerly known as Twitter) labeled this initiative the biggest “scam” on the planet, but the reality surrounding Lagarde’s statements is quite different. While she does discuss the reassessment of banknotes in the video, her comments have been misinterpreted and taken out of context.
Nowhere does Lagarde call for the outright elimination of cash. A deeper look at the ECB’s environmental strategies, which can be found on their official website from early 2024, reveals that she was likely alluding to steps towards creating a greener financial ecosystem rather than a complete phase-out of cash.
The ECB’s climate objectives outline plans to adopt “eco-design principles” for the upcoming euro banknote series, as well as include considerations for the environmental impact in the development of the digital euro, which is still in the preparation stage. This initiative envisions banknotes crafted entirely from organic cotton by the year 2027, as part of the ECB’s broader climate and nature plan.
Further efforts to reduce carbon footprints include thorough analyses of the repercussions of extreme weather on inflation and the economy as a whole, including the effects of biodiversity loss.
A study conducted by the ECB last December revealed that the average environmental footprint associated with banknote transactions amounted to 101 micro points per citizen in the euro area in 2019. This footprint is roughly equivalent to driving a car for eight kilometers, a mere fraction of an individual’s annual environmental consumption impact.
For context, producing a single cotton T-shirt and washing it weekly for a year translates to the same environmental footprint as driving 55 kilometers. Additionally, the number of plastic water bottles consumed annually equates to an environmental cost of approximately 272 kilometers, according to ECB data.
Key contributors to the environmental footprint of cash include energy use in ATM operations, the logistics of transporting and processing banknotes by national central banks, the production of paper, and the processes involved in verifying currency at retail outlets.
Importantly, the ECB has consistently asserted its commitment to making euro banknotes as eco-friendly as possible while ensuring that cash remains accessible and widely accepted. There is no current evidence supporting an agenda to eliminate cash altogether or to fully transition to a digital euro.
What is the Digital Euro?
In October 2021, the ECB initiated a study phase regarding the potential issuance of a central bank digital currency, known as the digital euro. This digital currency aims to introduce an additional form of public money across the euro area.
In June 2023, the European Commission proposed a legal framework that could facilitate the realization of the digital euro, although finalization is still pending. The digital euro is envisioned as a secure public monetary option issued directly by the central bank, distinguishing it from bank deposits and cryptocurrencies that carry inherent financial risks. The intent is for it to serve as an electronic counterpart to cash rather than as a crypto asset.
EU officials have unequivocally highlighted that the digital euro is designed to complement traditional cash payments, rather than replace them. It is expected that the digital euro will be freely usable across the eurozone, which comprises 20 of the EU’s 27 member states, for every day transactions such as shopping and rent.
Photo credit & article inspired by: Euronews
