12 Apr 2008

Save a Tree for Who?

Reuters reprints a press release* stating how much paper an average household would save by going paperless:
the average U.S. household receives about 19 bills and statements from credit card companies and banks every month and makes about seven payments by paper each month.

By switching to electronic bills, statements and payments, the average American household would save 6.6 pounds of paper a year, save 0.08 trees, and not produce 171 pounds of greenhouse gases -- the equivalent of driving 169 miles.

The survey, whose results were vetted by the Environmental Protection Agency, said it would also mean avoiding the deforestation of 24 square feet of forest, the release of 63 gallons of wastewater into the environment, and save 4.5 gallons of gasoline used for mailing.
Although these numbers seem small, they look to be accurate. Our system is pretty efficient, so the cost of billing is cheap.

They fail to include three important factors. First, paper statements take more time for consumers and companies to process. Second, the switch from paper to electronic takes significant time (let's say 20 minutes per billing source). Third, how many household have internet connections but do NOT do on-line billing?

Consider that group. Perhaps the reason they are not on-line is that the set-up cost (19*20 minutes = just over 6 hours) is not worth the stamps (and time?) they would save. Those other costs (dead trees, miles driven, etc.) are externalities that they are not responsible for.

*Hmmm... so why are these guys saying how much forest can be saved by electronic billing but not how much time and money companies could save if their customers switched? Try this:
The alliance [that made the study] is lead by NACHA, the non-profit electronics payment association, that represents more than 11,000 financial institutions who are encouraging customers to conduct more transactions online.
Whoops -- looks like we have a baptists and bootleggers situation here (save a tree! lower our billing costs!). The companies want you to switch to online billing to save trees them money. How much does paper billing cost those 11,000 companies?

Bottom Line: Since companies send bills with free envelopes, etc., they are the source of externalities. If these companies want to save the earth, they should split the benefits with consumers -- give a discount equal to half the reduction in billing costs to consumers who pay online. They (still) win, consumers win and the environment wins.


  1. In Australia the phone/utility companies are starting to charge you $2 per paper statement you receive!

    So not only are they saving money when people switch, but they found a new revenue stream that they justify as good for the environment by encouraging us all to stop getting paper bills.

    I don't mind going electronic to save trees, but it is nice to receive a paper trail to remind me that I'm spending too much on my phone.

  2. I had a conversation with a leading money analyst who is all in favor of paperless billing, until it becomes universally accepted and utilized to the tune of 80% of household usage, at which time she predicted banks would then start charging for it, just as they did with ATM's etc. The whole purpose of the ATM was to get you OUT of the bank and save them money and once it became a standard bearer, now they charge for it when you use a bank that isn't part of your branch.


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