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The carbon footprint of the Target Instant Payment Settlement (TIPS) system: a comparative analysis with Bitcoin and other infrastructures

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  • Pietro Tiberi

    (Bank of Italy)

Abstract

Reducing the environmental impact of human activities has become a strategic objective of governments, institutions, companies and individuals. In this paper, we estimate the CO2 equivalent emissions of the TARGET Instant Payment Settlement (TIPS) system and compare it with that of Bitcoin and other infrastructures. The TIPS carbon footprint in 2019 was almost 40,000 times smaller than that of Bitcoin; the difference is only partially accounted for by the lower overall volume of TIPS transactions, as the marginal increase in emissions per additional transaction is very small: the difference would therefore persist even if TIPS worked at full steam. The huge discrepancy in the carbon footprints of TIPS and Bitcoin stems from the fact that the latter uses a large amount of energy to generate trust and consensus among Bitcoin network participants, whereas in the case of TIPS this trust is provided by the Eurosystem. The comparison is then extended, using publicly available data, to other infrastructures. The over-performance of TIPS, while less marked than in the case of Bitcoin, remains nevertheless considerable.

Suggested Citation

  • Pietro Tiberi, 2021. "The carbon footprint of the Target Instant Payment Settlement (TIPS) system: a comparative analysis with Bitcoin and other infrastructures," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 5, Bank of Italy, Directorate General for Markets and Payment System.
    • Handle: RePEc:bdi:wpmisp:mip_005_21
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    File URL: https://www.bancaditalia.it/pubblicazioni/mercati-infrastrutture-e-sistemi-di-pagamento/approfondimenti/2021-005/N.5-MISP.pdf
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    References listed on IDEAS

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    1. Mauro Arcese & Domenico Di Giulio & Vitangelo Lasorella, 2021. "Real-time Gross Settlement Systems: Breaking the wall of scalability and high availability," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 2, Bank of Italy, Directorate General for Markets and Payment System.
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    Cited by:

    1. Carlo Gola & Johannes Sedlmeir, 2022. "Addressing the Sustainability of Distributed Ledger Technology," Questioni di Economia e Finanza (Occasional Papers) 670, Bank of Italy, Economic Research and International Relations Area.
    2. Agur, Itai & Lavayssière, Xavier & Villegas Bauer, Germán & Deodoro, Jose & Martinez Peria, Soledad & Sandri, Damiano & Tourpe, Hervé, 2023. "Lessons from crypto assets for the design of energy efficient digital currencies," Ecological Economics, Elsevier, vol. 212(C).
    3. Christian Gelleri, 2022. "Creating Monetary Collaborative Spaces for Social and Ecological Transformation," Sustainability, MDPI, vol. 14(23), pages 1-20, November.
    4. Emanuele Urbinati & Alessia Belsito & Daniele Cani & Angela Caporrini & Marco Capotosto & Simone Folino & Giuseppe Galano & Giancarlo Goretti & Gabriele Marcelli & Pietro Tiberi & Alessia Vita, 2021. "A digital euro: a contribution to the discussion on technical design choices," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 10, Bank of Italy, Directorate General for Markets and Payment System.

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    Keywords

    TIPS; Carbon footprint; Bitcoin;
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