No, Christine Lagarde doesn't want to scrap cash to fight climate change

Christine Lagarde, president of the European Central Bank (ECB) in Frankfurt, is hoping to stop climate change by overhauling the entire economy, including eliminating cash completely, according to claims made in a social media post.

Similar posts suggest that the European Central Bank (ECB) is planning to replace cash entirely with a digital euro, which is currently under consideration.

One post on X (formerly Twitter) describes this as the biggest "scam" on the planet, but in fact, the closest thing to a scam here is what it is claiming.

In the attached video, Lagarde does indeed mention reevaluating the use of banknotes to improve our carbon footprint, but her words have been taken out of context.

She never suggested eliminating cash altogether. Instead, a look at the ECB's climate plans, published on its website in early 2024, clarifies that Lagarde was likely referring to efforts aimed at making the financial system more environmentally friendly, rather than phasing out cash altogether.

Instead, a look at the ECB's climate plans, posted on its website in early 2024, clarifies what Lagarde was likely referring to.

As part of its 2030 carbon reduction targets, the ECB will work to "include eco-design principles for the future euro banknote series and incorporate environmental footprint considerations into the design of a digital euro that is currently in the preparation phase".

This means the ECB plans to produce banknotes made entirely from organic cotton by 2027, according to the bank's climate and nature plan.

Other measures the bank is taking as part of its carbon reduction targets include a deeper analysis of the impact of extreme weather events on inflation and the financial system and looking at how nature loss and degradation affect the economy.

Last December, an ECB study showed that the average environmental footprint of banknote payments was 101 micro points per euro area citizen in 2019.

That's the equivalent of driving a car for 8 kilometres, or 0.01% of the total environmental impact of a European’s annual consumption activities, according to the study.

By comparison, producing a cotton T-shirt and washing it once a week for a year is the equivalent of driving 55km, and the amount of manufactured water bottles consumed by a citizen in a year works out at the same as driving 272km, the ECB said.

The main factors contributing to the environmental footprint of banknotes include the energy consumption of ATMs, their transportation, processing by national central banks, paper manufacturing, and the authentication of banknotes in stores.

The ECB has also made clear that it wants to make euro banknotes as environmentally friendly as possible while ensuring cash is widely available and accepted. 

There's no evidence of it aiming to get rid of cash for good, or fully replace it with the digital euro.

What is the digital euro?

In October 2021, the ECB launched a study phase on the possibility of issuing a central bank digital currency, known as the digital euro, to provide an additional form of public money in the euro area.

In June 2023, the European Commission proposed a legal framework that could pave the way for the ECB to make the digital euro a reality, but the currency is yet to be finalised.

The digital euro would be public money issued by the central bank, unlike bank deposits or cryptocurrencies, which carry financial risk. It's intended to be more of an electronic equivalent of cash rather than something akin to a crypto asset.

EU officials have repeatedly stressed that it would complement, not replace, cash payments.

It would be free to use across the entire eurozone, which is made up of 20 of the EU's 27 member states, for everyday expenses like shopping and rent.