The climate impact of payments in Sweden is very low, according to a study conducted by researchers at the Royal Institute of Technology and funded by the Riksbank.^[49] See N. Arvidsson, F. Harahap, F. Urban and A. Nurdiawati (2024), “Climate impact assessment of retail payment services”, Working paper series No 431, Sveriges Riksbank. Cards and cash are the means of payment that contribute the highest climate impact per payment in Sweden. Despite this, the total climate impact of all card and cash payments in Sweden is less than the total emissions of 2,000 Swedes in one year. The study also shows that the more a payment method is used, the higher its total climate impact. At the same time, the climate impact per transaction is lower, as the climate impact of, for example, IT systems, transport and materials can be spread over more payments.

Card payments that require more material and physical equipment, such as card terminals, have a higher climate impact than payments by Swish, for example. The European Central Bank (ECB) has also conducted a study on the climate impact of euro banknotes.^[50] See ECB study from 2023. Product Environmental Footprint study of euro banknotes as a payment instrument. The study shows that the annual climate impact of using the banknotes in 2019 corresponded to 0.01 per cent of the total climate impact per citizen per year. This is roughly equivalent to driving a petrol car eight kilometres. The largest carbon footprint comes from the operation of ATMs, followed by cash transport.

The footprint of the Riksbank’s instant payment settlement system is low

Through the RIX payment system, the Riksbank provides two services for payment settlement, RIX-RTGS for the settlement of high-value payments and RIX-INST for the settlement of smaller and instant payments in Swedish kronor. Settlement means that money, securities or both change hands in a transaction by making a transfer between two parties.

In 2022, the Riksbank launched the RIX-INST service to enable banks to offer more account-to-account payments that reach the recipient immediately. For example, from March 2024 onwards, all payments in the Swish mobile app are settled in the payment system. As from November 2024, the Riksbank has opened up RIX-INST to more types of instant payment. RIX-INST uses the Eurosystem’s platform for instant payments, TIPS (TARGET Instant Payment Settlement). According to a report from Banca d’Italia, the TIPS platform has a low carbon footprint.^[51] See P. Tiberi (2021), “The Carbon Footprint of the Target Instant Payment Settlement (TIPS) System: A Comparative Analysis with Bitcoin and Other Infrastructures”, Research paper No. 5, Banca d’Italia. The report compares the energy consumption of TIPS with, among others, the VISA card network. The results indicate that TIPS is a more energy-efficient option, although the report points out that the comparison is between systems that handle different total volumes of transactions per year.

The carbon footprint of an e-krona would depend on its design

The Riksbank is investigating a digital complement to cash, known as the e-krona. Internationally, the concept is referred to as central bank digital currency (CBDC). E-krona would be digital kronor that are Swedish and issued by the Riksbank. As digital money, they could be used for more types of payments than cash.

In cooperation with the Royal Institute of Technology, the Riksbank has conducted a study on the potential environmental impact of a CBDC.^[52] See N. Arvidsson, F. Harahap, F. Urban and A. Nurdiawati (2024), “Potential Climate Impact of Retail CBDC Models”, Working paper series No 437, Sveriges Riksbank. The rapid development of the payments market has led to new payment services and technologies. It is important to examine how a CBDC compares to other payment services in terms of efficiency. The development of a CBDC has potential environmental impacts mainly due to its electricity consumption. The design will determine the environmental impact of a CBDC, as the system can be scaled up to include multiple actors and is influenced by the location and energy sources of the server.

The study examines the environmental impact of a CBDC depending on its different technical designs. The technical design refers to how and where the information necessary for making payments is available. Whether several actors have the same information, a subset of the same information and whether the information is centralised have a bearing on the environmental impact. A centralised solution where the Riksbank has control may be less energy-intensive. The results show that the energy consumption per transaction for a centralised solution is comparable to that of card payments. In a decentralised design, more electricity supply is required, when each actor needs to operate and maintain larger systems themselves. This often requires more servers and computers, and increases the amount of data that needs to be processed per transaction. In a semi-centralised design, on the other hand, participating actors are primarily responsible for operating and maintaining systems, which facilitate their interfaces and services for consumers. With each additional actor, for the semi-centralised model as well as the decentralised model, one can potentially assume a linear or exponential increase in energy consumption. Whether it increases linearly or exponentially depends on the implemented validation process chosen for the transactions.

Validating payments is important to ensure the integrity of the transaction but also to maintain the security of the system. Validation is done through various consensus mechanisms. Consensus mechanisms such as Proof of Work^[53] Proof of Work is a consensus mechanism used in many cryptoassets to verify and authorise transactions on the block-chain network. It is designed to be resource-intensive and time-consuming, making it difficult for anyone to manipulate or attack the network. are used in cryptoassets and solve complex mathematical problems to confirm transactions. Proof of Work requires more energy than other types of consensus mechanisms, which instead tend to be more centralised. The study shows that a CBDC, which uses some form of block-chain, does not necessarily have a greater climate impact than existing traditional systems. The benefits of technological developments in the payments and securities markets are that settlement cycles can be shortened, and different types of conditional transactions can be carried out than those used today.