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Green Finance, 5(4): 603–623.
DOI: 10.3934/GF.2023023
Received: 22 August 2023
Revised: 01 December 2023
Accepted: 07 December 2023
Published: 13 December 2023
http://www.aimspress.com/journal/GF
Research article
Can Central Bank Digital Currencies be green and sustainable?
Sergio Luis Náñez Alonso*
Dekis Research Group, Department of Economics, Faculty of Social and Legal Sciences, Catholic
University of Ávila, Canteros st., 05005, Ávila, Spain
* Correspondence: Email: sergio.nanez@ucavila.es.
Abstract: Within digital finance, CBDCs are booming. As there are currently four operational CBDCs
and as many as ninety-four central banks, jurisdictions or currency areas are testing or investigating
the launch of a retail CBDC. The study was based on a sample of 34 countries or currency areas, which
were classified into three groups. This research aimed to answer the following research questions: 1.
Can CBDCs be considered green and sustainable? 2. How can we determine whether a CBDC is green
and sustainable? 3. Which countries are closest to having green CBDCs? It has been calculated the
total and the percentage of CBDCs that could be considered green or sustainable according to each
country or currency area; in this model, it has been considered one monetary unit issued in a
green/sustainable CBDC format for each point that a country obtains in this model that is adjusted
according to four variables: Electricity prices for households and for businesses, renewable electricity
production and CO2 emissions. The countries that could launch a higher percentage of
green/sustainable CBDCs in circulation would be the countries in the Eurozone and the United
Kingdom, with these countries exceeding 70%. This was followed by Sweden (60%), Australia (58%)
and the Bahamas (close to 54%). Only the Bahamas has its CBDC already launched and operational.
Jamaica is also in the top ten and has its CBDC up and running. Japan closes the top 10 with just over
51%. Those countries with cleaner sources of power generation will be able to keep their CBDCs
operating more sustainably. The environmental impact, however, will vary depending on the design
choices of a CBDC and the country where it operates, according to the variables of this model.
Keywords: green finance; CBDC; green CBDC; sustainable CBDC; digital finance; sustainable
digital finance
JEL Codes: E50, E52, E58
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1. Introduction
Since 2008, when a person or a group, under the pseudonym Satoshi Nakamoto, conceived a
decentralized digital currency based on a payment system without a central bank or a single authority
called Bitcoin, cryptocurrencies have grown exponentially. In 2009, Bitcoin began to operate following
a message sent to the metzdowd.com cryptocurrency mailing list, which was signed with the alias
Satoshi Nakamoto and entitled “Bitcoin P2P e-cash paper” (Nakamoto, 2008). Its price went from
USD 1 in February 2011 to a peak of USD 69,000 in November 2021. Not only has the growth of its
price been exponential, but so has the number of users, which was estimated to be 5 million in 2016
and around 220 million in 2021 (Auer et al., 2023). It is also the cryptocurrency with the largest market
capitalization, with a value of over USD 300 billion (CoinMarketCap, 2023). After Bitcoin, many more
cryptocurrencies appeared, such as Ethereum, Ripple and Litecoin, to name a few. In the last 14 years,
cryptocurrencies have evolved from being a new technology oriented to peer-to-peer payments without
the supervision of a centralized authority to become financial assets that are traded by millions of users
worldwide (Kyriazis, 2021). Two countries in the world have declared Bitcoin as a legal tender. The
first is El Salvador (Alvarez et al., 2022). The second country is Central African Republic, which, in
April 2022, announced a surprise vote on a law to legalize Bitcoin in the country as a legal tender
(Odeh, 2022). The emergence of cryptocurrencies and the threats they may pose by competing with
central bank-backed money (Nabilou, 2019; Náñez Alonso et al., 2020) have aroused the interest of
central banks around the world in digital currencies; this has led to the emergence of digital currencies
backed by central banks (Auer et al., 2020) and are called Central Bank Digital Currencies (CBDCs)
(Kumhof & Noone, 2021). However, as with cryptocurrencies, their degree of adoption and
implementation varies widely from region to region, as not all regions have the same characteristics
or motivations for implementing a CBDC (Náñez Alonso et al., 2021; Allen et al., 2022). A CBDC,
although its design and characteristics may differ considerably, is a digital currency that is universally
accessible and could be exchanged among peers; but in this case, it would be issued and backed by a
central bank or a monetary authority (Cunha et al., 2021; Náñez Alonso et al., 2021; Ozili, 2022).
There are currently three countries and one currency area that have already implemented a CBDC that
is operational. The first of these countries is the Bahamas, which launched its CBDC called Sand Dollar
in October 2020. The second is Jamaica, which launched its CBDC called Jam-Dex in 2022. The third
is Nigeria, which launched its CBDC called e-naira. The fourth includes member countries of the
Eastern Caribbean Central Bank (ECCB) whose CBDC is called D-Cash (Náñez Alonso et al., 2023).
In addition, according to a report of the International Monetary Fund, in September 2022, almost 100
CBDCs were in the research or development phase worldwide (International Monetary Fund, 2022).
There are several reasons for launching a CBDC. One of them is to improve financial inclusion (Náñez
Alonso et al., 2020; Ozili, 2021; Ahiabenu, 2022; Ozili, 2022). Other reasons include to maintain
control over monetary policy and macroeconomic policy (Yang & Zhou, 2022) and to reduce (through
its implementation) the use of other means of payment related to illicit activities (Ozili, 2022). On top
of all these reasons, there is a growing concern for the environment and for green and sustainable
finance, which CBDCs should not be oblivious to (Yang et al., 2023).
In this article, I aim to answer three questions. First, can CBDCs be considered green and
sustainable? Second, how can we determine whether a CBDC is green and sustainable. Third, which
countries are closest to having green CBDCs? To answer these three questions, this article is structured
as follows: In the introduction, an analysis is conducted on the emergence of CBDCs and their rise in
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the wake of cryptocurrencies, proposing sustainability and concern for the environment as a motive
for their launch. The literature review analyzes the concern for green finance and the theory provided
by the works published to date. In the Materials and Methods section, I explain the sources from which
I extracted data to generate my model. For the methodology, I explain the model applied to launch a
green/sustainable CBDC. In the Results section, I classify the countries that could launch a higher
percentage of a green/sustainable CBDC in circulation, both globally and according to the degree of
development of their CBDC (already underway or pilot test completed; proof of concept already
completed or to be implemented soon; and in advanced stages of research). Finally, the results,
limitations and gaps of my study are discussed and the conclusions are drawn.
2. Literature review: CBDCs and sustainability
Central Bank Digital Currencies (CBDCs) are all the rage. According to a report by Auer et al. in
2020 and an updated report in February 2023, there are four operational CBDCs in the world, including
in the Bahamas, in the Caribbean in countries under the umbrella of the Eastern Caribbean Central
Bank (ECCB), Nigeria and Jamaica. This makes the Caribbean the current epicenter of operational
CBDCs (Náñez Alonso et al., 2022; Náñez Alonso et al. 2023). However, in addition to the above,
there are currently pilot projects in 34 jurisdictions, covering both wholesale and retail CBDCs.
Despite the fact that there are countries where CBDCs are already in operation and others have pilot
projects at an advanced stage, the speed of implementation in some cases is slow and, in other countries,
such projects have been stalled because they present some problems (Bindseil, 2022). In many cases,
these problems are related to the reasons for issuing a CBDC; they vary from country to country
(Bijlsma et al., 2021; Maryaningsih et al., 2022; Náñez Alonso et al., 2020), as do policy approaches
and technical designs. Not all countries or currency areas are equally optimal for implementing a
CBDC (Náñez Alonso et al., 2021). In this article, I focus on the sustainability of CBDCs. Although
CBDCs are not cryptocurrencies, their operation does require the use of energy.
Cryptocurrencies have accelerated the process of digitalization and democratization of money
(Temperini and Corsi, 2023). However, within the scientific community, there is ongoing debate and
concern regarding the potential environmental ramifications of virtual currencies.
Truby (2018) draws attention to the environmental impact of Bitcoin mining and, by extension,
other cryptocurrencies. The discourse revolves around the consequences of mining activities and the
extent to which the rapid expansion of this practice could impede the achievement of established goals
aimed at mitigating climate change. In their investigation, Mora et al. (2018) and Dittmar and
Praktiknjo (2019) emphasize that energy-related emissions from cryptocurrency mining might
contribute to pushing global warming beyond the critical threshold of 2 °C. Martynov (2020) quantifies
this impact economically, illustrating a scenario where each 1 USD of cryptocurrency coin value
created could be accountable for 0.66 USD in health and climate damages. Based on their study
focusing on the United States, Goodkind et al. (2022) further assert that Bitcoin incurs social costs
surpassing the market price during most considered periods. Contrastingly, Masanet et al. (2019) argue
that implausible projections are exaggerating Bitcoin’s CO2 emissions in the short term, while Houy
(2014) and Houy (2019) criticize the inclusion of unprofitable mining platforms, leading to a
substantial overestimation of emissions. The energy sources utilized in cryptocurrency mining, as
noted by Fadeyi et al. (2019), Goodkind et al. (2020) and Goodkind et al. (2022), can result in increased
pollution, with air pollution being a notable concern. Leslie (2020) adds to the discourse by pointing
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out the rise in electronic waste and the additional energy requirements to counteract the heat released
from these platforms.
This ongoing debate regarding the environmental and social costs associated with decentralized
finance has not only brought attention to the financial sector but also extended its implications to
Central Bank Digital Currencies (CBDCs), as highlighted by Yang et al. (2023) and Mincewicz (2023).
CBDCs should not be oblivious to the situations described above with regard to cryptocurrencies.
Different organizations and institutions have included sustainability among the objectives of their
future CBDCs. In the United States of America, the design of a future digital dollar has been proposed,
while aiming to respect the principles of sustainability (U.S. Committee on Financial Services, 2021).
In Europe, there are various sectors and reports that advocate that the future digital euro should respect
and guarantee its sustainability, as well as the lowest possible environmental impact (European Green
Digital Coalition, 2023). Even a joint report by the Bank of Canada, the European Central Bank, the
Bank of Japan, the Sveriges Riksbank, the Swiss National Bank, the Bank of England, the Board of
Governors of the Federal Reserve System and the Bank for International Settlements (BIS) states that
one of the guiding principles of CBDCs should be their sustainability (Bank for International
Settlements, 2020). In fact, the BIS itself has included its objectives for 2022 and beyond the promotion
of green and sustainable finance, including CBDCs (Bank for International Settlements, 2022). In short,
it is a matter of linking the development of CBDCs with the Sustainable Development Goals (SDGs)
listed by the United Nations (UN). Thus, I found authors who directly link achieving financial
sustainability and the development of green finance with CBDCs as a key player (Chu, 2023; Ozili,
2023c; Paradise, 2022), specifically the Sustainable Development Goal number eight: “Promote
inclusive and sustainable economic growth, employment and decent work for all” (Ozili, 2023a).
Considering that the largest number of users of digital finance are young people, especially those under
35 years of age (Alonso et al., 2023), raising awareness and promoting the notion of sustainability
among young people would lay the foundation for greater future sustainability. Also, Ding et al. (2022)
and Náñez Alonso et al. (2020) report the positive effects that CBDCs could have on rural and
underdeveloped environments. Promoting green and sustainable finance via CBDCs as well should be
a priority of public policies, as stated in a study (Ren et al., 2022). In fact, a study by Chen (2018)
indicates that CBDCs can be used as a means to “decarbonize” the economy. In this sense, it is
interesting to highlight the work of Yang et al. (2023), who indicate that “a CBDC reduces SO2, NOx
and smoke emissions, and improves the proportion of green land, which is beneficial for sustainable
development”, concluding that a CBDC is useful to accelerate green finance. The same conclusion is
reached by Maltais and Nykvist (2020) in their study on green bonds in Sweden, as a rapidly growing
green bond market is affecting citizens’ commitment to sustainability in a positive way. Even other
authors, such as Dziwok and Jäger (2021) and Feng et al. (2023) talk about developing a “green”
monetary policy where CBDCs would undoubtedly play a key role.
However, in many cases, environmental sustainability is not shown as a priority for the acceptance
and use of CBDCs (Liu et al., 2022; Náñez Alonso et al., 2020).
At this point, and in view of the importance that green finance currently has and will have in the
future, a reality to which CBDCs should not be oblivious, the following question arises: What factors
influence whether a CBDC is more or less sustainable?
Based on a study by Lee and Park (2022), there are several factors that influence the sustainability
of a CBDC, including the source of energy generation needed for CBDC operations, energy prices and
CO2 emissions.
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A source of energy is needed to operate CBDCs in the first place. If the power generation in a
country where a CBDC is intended to be implemented is green or sustainable, then the impact of the
CBDC on the environment will be reduced, thereby ensuring sustainable economic growth (Batrancea
et al., 2019; Dash et al., 2022; Warjiyo, 2023).
The prices of energy needed for CBDC operation should be taken into account. As with
cryptocurrencies (but in a much less intensive way), CBDCs need energy to operate. Hence, given that
the cost associated with electricity is a pivotal determinant that influences mining decisions, as
emphasized by de Vries (2018), Li et al. (2019) and Malfuzi et al. (2020), Central Bank Digital
Currencies (CBDCs) should conscientiously take this factor into account and not overlook its
significance. Both Distributed Ledger Technology (DLT)-based and non-DLT-based CBDCs have the
potential to entail lower energy consumption for basic processing functions, compared to traditional
means of payment and also cryptocurrencies (Agur et al., 2023). In fact, authors like Tiberi (2021)
estimate that CBDCs even have the potential to consume less energy than credit card payment
processes, a position that is reinforced by Sedlmeir et al. (2020), Platt et al. (2021) and Schroeder
(2023), who indicate that blockchain-based solutions still require more energy than centralized
architectures without blockchain. This corroborates with the estimates reported by Lee and Park (2022),
where means of payment based on networks similar to credit cards consume less energy than those
based on blockchain; so, the final cost will also be lower.
Figure 1. Electricity consumption per transaction (kWh) by means of payment used.
Source: own elaboration based on data from Lee and Park (2022).
Another potential benefit of CBDCs and their aid to sustainability comes from cost savings
regarding printing banknotes in circulation (physical currency) (Fabris, 2019). In fact, in a study by
Rochemont (2020), the average cost of electricity for the US Bureau of Engraving and Printing
banknote manufacturer corresponds to 11.38 cents/kWh. Other authors indicate figures similar to those
shown in Figure 1. These figures would be higher than the cost in terms of energy for a central bank
to operate and maintain a CBDC network in operation.
The energy consumption required to use mobile devices to operate a CBDC should not be
overlooked either, which would be borne by users. Payments would mostly be made through a mobile
application called “digital wallet”, which consumes energy. However, authors such as Alotaibi et al.
(2020) and Jiang et al. (2016) indicate that digital wallets are similar to other applications in energy
consumption, and this energy consumption would be considered negligible; in fact, Wilke et al. (2013)
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estimate that the minutes of use of an application to perform a transaction via a digital wallet can be
measured in the order of 10-7 kW/h.
Emissions of CO2 and other polluting gases are another factor that will influence the sustainability
of a CBDC. This is directly related to the way in which electricity is generated in each country or
currency area where the CBDC is implemented. Thus, those countries with cleaner sources of power
generation will be able to keep their CBDC in operation in a more sustainable way. A study by Yang
et al. (2023) states that “a CBDC reduces emissions of SO2, NOx and smoke”. This situation is
reinforced by Ding et al. (2022), who report in their study in China that, under certain circumstances,
digital finance can improve the CO2 reduction capacity. In their study, Zhao et al. (2021) also indicate
that digital finance has a significant inhibitory effect on carbon emissions. In sum, as Ozili (2022)
notes, the emergence of CBDCs offers central banks the opportunity to make an important contribution
to the transition toward a circular and sustainable economy.
3. Materials and methods
3.1. Materials
To determine which countries could issue a “green” or “sustainable” CBDC, I started with a
sample of 34 countries. These countries were selected from four sources (Atlantic Council, 2023; Auer
et al., 2020; Kiff, 2023; Mikhalev et al., 2023). They were classified according to the degree of
development of their CBDC and divided into three groups:
1. Eight jurisdictions where the central banks (CBs) have already implemented, or pilot tested a
CBDC (or will do so shortly).
2. Twenty jurisdictions where the central banks have conducted proofs of concept or prototypes (or
will soon do so).
3. Six jurisdictions where the central banks have their CBDCs in advanced stages of research and
development.
Additionally, data were sourced from the “Environmental Performance Index 2022” (University
of Yale, 2023) concerning the chosen group of nations. This index offers a numerical foundation for
the assessment, examination and comprehension of the environmental practices across 180 countries.
It serves as a metric to gauge which countries are deemed the most sustainable and environmentally
conscientious. In the assessment of nations eligible to introduce a green/sustainable Central Bank
Digital Currency (CBDC) or to circulate a substantial quantity of a green/sustainable CBDC, it
becomes imperative to take into account countries exhibiting higher levels of sustainability according
to the Environmental Performance Index (EPI) and other pertinent factors. First, data on energy prices
for businesses were extracted from the Globalpetrolprices consortium database and expressed in kW/h
in US dollars (Globalpetrolprices, 2023a). Also, data on energy prices for households were extracted
from the same database (prices per kW/h in US dollars) (Globalpetrolprices, 2023b). In the third
instance, the percentage of electricity production derived from renewable sources was considered. This
information was sourced from data provided by the World Bank and compiled using statistics from the
International Energy Agency (IEA) and the OECD (The World Bank, 2023b). Fourth, data on CO2
emissions (expressed in metric tons per capita) were obtained (The World Bank, 2023a). In order to
determine how many CBDCs in circulation could be considered green or sustainable, it is necessary
to know the level of reserves in each country. For this purpose, I also used total reserves, including
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gold, which were denominated in USD at current prices, as research material. All these made it possible
to generate a dataset with records, which is presented in the Annex as Table A.1.
3.2. Methodology
After consolidating all requisite data into the database, as outlined in the appendix in Table A.1,
I initiated the construction of my model. I started with a hypothesis and a method similar to Jaimes
Becerra et al. (2023), where I tried to calculate the total and the percentage of CBDCs that could be
considered green or sustainable. However, in my method, I considered one monetary unit issued in the
CBDC format as green/sustainable for each point that a country obtains in the adjusted Environmental
Performance Index, a method already followed for the case of cryptocurrencies by Náñez Alonso et al.
(2021). Thus, if a country or jurisdiction obtains 55 points in the CBDCgs, it means that 55% of its
reserves would be considered green or sustainable if they were issued via a CBDC. To conduct my
method, first, I had to adjust the EPI with the rest of the variables via linear regression (Abu-Bader,
2021; Náñez Alonso et al., 2021; Vilà Baños et al., 2019) using Equation 1. I approximated the
dependence relationship between my dependent variable CBDCgs (which, in my case, would indicate
a more sustainable country via a higher CBDCgs) and the 4 independent variables, with W and a random
term ε, as follows:
CBDCgs = w1⋅EPb+w2⋅REp−w3⋅CO2e−w4⋅EPh+ ε (1)
Since the parameters W0, W1... are unknown constants, they must be estimated using the sample data
I collected (Abu-Bader, 2021; Denis, 2021 Náñez Alonso et al., 2021), where:
CBCDgs is a CBDC that is green and sustainable.
EPb is the price of electricity for businesses.
REp is energy production from renewable sources.
CO2e is CO2 emissions.
EPh is the price of electricity for households.
Commencing with the utilization of the linear regression model and its application to the data shown
in Table A.1 of the Annex, I derived the descriptive statistics presented in Table A.2 of the Annex. The
sample for my statistical analysis (N) encompassed 34 countries with complete data. Following the
application of linear regression to the variables, I established the model detailed in Table 1.
Table 1. Green and sustainable CBDC model.
Model
R
R square
Adjusted R-squared
Standard error of the
estimate
Durbin-Watson
1
0.780
0.608
0.554
9.14749
2.148
Source: own elaboration based on data shown in Table A.1 of the appendix and using IBM SPSS Statistics 28.
The following were used as the predictors: Constant, electricity prices for households (kWh, U.S.
dollar), renewable electricity production (% of total electricity production), CO2 emissions (metric tons
per capita) and electricity prices for businesses (kWh, U.S. dollar). The dependent variable was the
Environmental Performance Index.
Upon the application of the aforementioned model, I successfully calculated the parameters W0,
W1... utilizing the sample data I gathered and analyzed using SPSS (Abu-Bader, 2021; Batrancea,
2021). These outcomes are delineated in Table 2.
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Table 2. Estimation of the parameters W of the green and sustainable CBDC model.
Unstandardized
coefficients
Standardized
coefficients
t
Sig.
95.0% confidence
interval for B
Collinearity
statistics
W
Error
Beta
Lower
limit
Upper
limit
Tolerance
VIF
(Constant)
23.682
4.283
5.530
<0.001
14.923
32.441
Electricity
prices for
businesses
(kWh, U.S.
dollar)
33.601
23.946
0.284
1.403
0.017
−15.374
82.576
0.330
3.028
Renewable
electricity
production (%
of total
electricity
production)
0.074
0.052
0.174
1.412
0.016
−0.033
0.181
0.893
1.119
CO2 emissions
(metric tons per
capita)
0.770
0.345
0.269
2.235
0.033
0.065
1.475
0.936
1.069
Electricity
prices for
households,
(kWh, U.S.
dollar)
53.112
21.474
0.497
2.473
0.019
9.192
97.032
0.335
2.989
Source: own elaboration based on data from Table A.1 and using IBM SPSS Statistics 28.
If I take the data on the unstandardized coefficients W from the above table, my model is
represented by Equation 2:
𝐶𝐵𝐷𝐶𝑔𝑠 = 23,682 + (23,946 ∗𝐸𝑃𝑏) + (0,074 ∗ 𝑅𝐸𝑝) + (0,770 ∗ 𝐶𝑂2𝑒) + (53,112 ∗𝐸𝑃ℎ) (2)
4. Results
As depicted in Table 2, my model achieves an R-squared coefficient of 0.608, signifying that it
accounts for approximately 60.8% of the variance in the accurate classification of a CBDC as green or
sustainable through the rescaled EPI. Additionally, the Durbin–Watson test result in the same table is
2.148, indicating minimal autocorrelation in the employed regression model as it is close to the critical
value of 2. Conversely, as illustrated in Table 3, the p-value (Sig.) of the ANOVA test is below 0.05.
Consequently, the presented hypothesis can be affirmed, suggesting that at least one of the parameters
significantly differs from “zero”, thereby validating the overall model.
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Table 3. Anova results.
CBDCgs
Sum of squares
gl
Root mean square
F
Sig.
1
Regression
3760.281
4
940.070
11.235
<0.001
Waste
2426.619
29
83.677
Total
6186.899
33
Source: own elaboration based on data from Table A.1 and using IBM SPSS Statistics 28.
The following variables were used as the predictors: Constant, electricity prices for households,
(kWh, U.S. dollar), renewable electricity production (% of total electricity production), CO2 emissions
(metric tons per capita) and electricity prices for businesses (kWh, U.S. dollar). My dependent variable
was CBDCgs. Finally, when I checked the p-value (Sig.) of the independent variables in Table 3, they are
all statistically different from zero (Sig < 0.05), so they can remain in the model (Abu-Bader, 2021; Denis,
2021). Table A.3 in the appendix shows the statistics of the residuals.
With respect to the statistical results, I observe that the R-squared coefficient is 0.608. According
to authors such as Tarling (2008) and Ozili (2023b), an R-squared coefficient of 0.6 or higher in social
science studies, as in my case, is acceptable.
Regarding the skewness and kurtosis of the variables under study, they show the following results.
First, total reserves exhibit a remarkably positive skewness (3.859) and a high kurtosis (17.422), which
point to a distribution with a pronounced right tail. This phenomenon suggests a concentration of
values toward the upper end of the range, indicative perhaps of a significant disparity in reserves. In
contrast, when analyzing the Environmental Performance Index (EPI), I observe a smaller positive
skewness (0.272) and a negative kurtosis (−0.157). These indicators suggest a slightly skewed
distribution to the right, but with less pronounced tails. This could imply greater homogeneity in the
EPI data, with a higher concentration around the average. Electricity prices for firms exhibit a positive
skewness (1.048) and a kurtosis (0.353) that is close to normal. This configuration indicates a right tail
in the distribution of prices, although the shape of the distribution more closely resembles a normal
bell. This trend could reflect some variability in electricity prices for businesses, but there were no
significant extremes. In the renewable electricity production domain, a negative skewness (−0.970)
and a negative kurtosis (−0.548) stand out. This suggests a distribution skewed to the left, indicating
that most countries tend to have a lower percentage of renewable electricity production, with less
variability at the upper extremes. Finally, CO2 emissions exhibit a pronounced positive skewness
(1.360) and high kurtosis (2.253). These results suggest a distribution with a heavier right tail,
indicative of significant disparity in CO2 emissions, with some countries emitting substantial amounts,
while others maintain lower emissions. This pattern may reflect inequalities in the environmental
policies and carbon footprint of different nations. I used the variance inflation factor (VIF) following
previous research (Batrancea et al., 2021; Batrancea, Rathnaswamy and Batrancea, 2021) to detect
possible multicollinearity in the variables. The VIF calculations are presented in Table 3. None of the
results obtained exceeds a coefficient of 1. This indicates no correlation between a predictor variable
and any other predictor variables in the model; therefore, there is no multicollinearity.
Applying the rescaled CBDCgs equation to the dataset shown in Table A.1 of the Annex for each
country enables the creation of a visual ranking. This ranking provides insights into countries where a
higher issuance of green/sustainable CBDCs might be feasible. As can be seen in Figure 2 and Table A.4
in the Annex, the countries that could launch a higher percentage of CBDCs in green/sustainable
circulation would be countries in the Eurozone and the United Kingdom. These countries exceed 70%
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and are well ahead of the rest of the countries included in this study. Sweden ranks third with just over
60% of its CBDC considered green/sustainable, followed by Australia with 58% and the Bahamas with
around 54%. The countries that occupy the top positions are European countries along with one country
from Oceania and another from the Americas. Only the Bahamas has already launched and is operating
its CBDC. Jamaica is also in the top ten positions and has its CBDC in operation. Japan closes the top
10 with just over 51%. When I analyzed the situation by group, I obtained the results described below.
Figure 2. Percentage of total CBDCs that could be considered “green”. Source: own
elaboration based on data from Table A.4 and analyzed using Tableau Desktop Professional
Edition v.2023.2.
Within the first group, which includes jurisdictions in which their central banks (CBs) have
already implemented a CBDC or have conducted a pilot test (or will do so shortly), the Bahamas stands
out, where nearly 54% of its CBDC could be called green/sustainable according to my model. This is
followed by Jamaica, with about 53% and Uruguay, with about 49%. The rest of the other countries,
including China (38.5%), are still far behind. This is shown in Figure 3 and Table A.4 in the Annex.
Figure 3. Percentage of total CBDCs that could be considered “green” in jurisdictions where
central banks (CBs) have launched or piloted (or soon will). Source: own elaboration based on
data from Table A.4 and analyzed using Tableau Desktop Professional Edition v.2023.2.
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Within the second group, which includes countries where their central banks have carried out
proofs of concept or prototypes (or will do so soon), the Eurozone stands out as more than 70% of its
CBDC could be called green/sustainable according to my model. This is followed by Sweden with
almost 61%, and then Norway (53%), New Zealand (54%) and Japan (almost 52%), whose CBDCs
could be called green/sustainable according to my model. These results are shown in Figure 4 and
Table A.4 in the Annex.
Figure 4. Percentage of total CBDCs that could be considered “green” in jurisdictions where
CBs have conducted proofs of concepts or prototypes (or soon will). Source: Own elaboration
based on data from Table A.4 and analyzed using Tableau Desktop Professional Edition
v.2023.2.
Figure 5. Percentage of total CBDCs that could be considered “green” in jurisdictions where
CBs are in advanced stages of research and development. Source: own elaboration based on
data from Table A.4 and analyzed using Tableau Desktop Professional Edition v.2023.2.
Within the third group are those countries where their central banks or monetary authorities are
in advanced stages of research and development of their CBDCs. Here, the United Kingdom stands
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out as just over 70% of its CBDC could be considered green/sustainable according to my model. This
is followed by Australia (58%) and Singapore (around 53%). These results are shown in Figure 5 and
Table A.4 in the Annex.
I therefore see that the most sustainable countries for launching a green/sustainable CBDC would
be mainly European countries (Eurozone), the United Kingdom, Norway and Sweden. Australia and
New Zealand are also located in the high zone, and two countries in the Caribbean area, the Bahamas
and Jamaica whose CBDCs are already in operation, stand out positively, with just over 50%. However,
all of these countries still have some way to go to increase the amount of CBDCs that could be
considered green/sustainable.
A discernible trend emerges in Europe: These nations demonstrate advanced capabilities in clean
energy production, boast lower average electricity prices and exhibit a notable proportion of
sustainable energy generation. Moreover, these countries prioritize investments in research and
development along with human capital. This pattern extends to Asia and Oceania, where Japan,
Australia and New Zealand also align with the aforementioned characteristics.
A parallel pattern is evident in both Europe and Asia: All these nations are located in the northern
hemisphere, with the majority being situated in the northern part of this hemisphere (excluding
Australia and New Zealand). When expanding the analysis to include fifteen countries, only one non-
northern hemisphere country, Uruguay, appears in the list, deviating somewhat from the established
trend. The additional countries on this list, alongside Uruguay, include the United States, Canada,
South Korea and Hungary, which are detailed in Table A.4 in the Annex.
Conversely, there are countries on the opposite end of the spectrum where the issuance of a
green/sustainable CBDC only constitutes a minority. Nigeria, with 28.6%, and the ECCB, with 30.9%,
occupy the last two positions in the list of 34 countries. These are two countries that already have their
respective CBDCs (e-Naira and D-cash) in operation. China, another country where several pilot tests
have already been carried out, could call only 38.45% of its CBDC as green/sustainable, occupying
the 24th position out of the 34 countries analyzed. The complete ranking can be found in Table A.4.
5. Discussion
There is no doubt about the current trend in CBDCs, especially when there are currently 94 central
banks, jurisdictions or monetary areas that have issued, tested, piloted and/or are investigating the
launch of a retail CBDC (John Kiff, 2023). Some of the possible difficulties in implementing a CBDC
have been studied from various points of view. Kaczmarek (2022) and Tercero-Lucas (2023) indicate
that without a central bank implementing a CBDC with the aim of having a positive net worth and the
absence of bank runs, a high demand for CBDCs is a necessary condition to achieve both objectives.
Also, ensuring privacy in transactions is a concern noted by Tronnier (2021) and Tronnier et al. (2022),
which will greatly influence the adoption of a CBDC. Other factors that may pose difficulties in the
adoption of CBDCs may be the national culture itself, as pointed out by Luu et al. (2022); the lack of
digital skills of citizens where it is implemented (Ahiabenu, 2022; Alora et al., 2024); and the degree
of competition that a CBDC has with other digital payment means in the country (Wenker, 2022; Alora
et al., 2024). The trust that citizens have in their institutions, including their central banks, is also a
limiting factor (Ngo et al., 2023; Ozili and Náñez Alonso, 2024). Adding to this is the current trend in
finance in the pursuit of energy sustainability (Taghizadeh-Hesary & Yoshino, 2020), aiming to help
meet and achieve the SDGs (Chu, 2023; Ozili, 2023c; Paradise, 2022). It is, therefore, a matter of
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achieving sustainable and inclusive economic growth (Desalegn & Tangl, 2022). A proof of this trend
is the pronouncement of several international organizations through different bodies (Bank for
International Settlements, 2022; European Green Digital Coalition, 2023; U.S. Committee on
Financial Services, 2021) that clearly indicates that one of the guiding principles of CBDCs should be
their sustainability and respect for the environment. The environmental impact, however, will vary
depending on the CBDC design choices (Lee & Park, 2022).
In my study, I set out to answer three questions related to the sustainability of CBDCs: First, can
CBDCs be considered green and sustainable? After conducting a literature review, I found that CBDCs
cannot only come to be considered green and sustainable, but they are going to play a key role in the
development of green finance. Chen (2018) indicates that the use of CBDCs is a means to “decarbonize”
the economy, and Yang et al. (2023) indicate that CBDCs can reduce emissions of polluting gases into
the atmosphere; therefore, promoting green and sustainable finance via CBDCs should be a priority of
public policies, as stated in a previous study (Ren et al., 2022). However, in many cases, environmental
sustainability is not shown as a priority for the acceptance and use of CBDCs by citizens (Liu et al.,
2022; Náñez Alonso et al., 2020).
Second, how can we determine whether a CBDC is green and sustainable? To answer this question,
I initially conducted a literature search to determine which factors could affect the operation of a CBDC.
It was identified that both Distributed Ledger Technology (DLT)-based and non-DLT-based CBDCs have
the potential to promote lower energy consumption for basic processing functions, compared to
traditional means of payment and also cryptocurrencies (Agur et al. 2023). In fact, authors like Tiberi
(2021) estimate that CBDCs even have the potential to consume less energy than credit card payment
processes. A position that is reinforced by Sedlmeir et al. (2020) and Platt et al. (2021). Thus, energy and
its price are configured as a key element. Emissions of pollutant gases are another determining factor
selected as they will influence the sustainability of a CBDC. This is directly related to the way in which
electricity is generated in each country or currency area where a CBDC is implemented. Thus, countries
with cleaner sources of power generation will be able to keep their CBDCs in operation in a more
sustainable way (Ding et al., 2022; Yang et al., 2023). Last but not least, it is necessary to consider where
the source of energy needed to operate a CBDC comes from in the first place. If the power generation in
the country where a CBDC is intended to be implemented is green or sustainable, then the impact of the
CBDC on the environment will be reduced, thus ensuring sustainable economic growth (Batrancea and
Tulai, 2022; Dash et al., 2022; Lee & Park, 2022; Warjiyo, 2023).
After determining these factors as being fundamental, I applied a hypothesis and a method
similar to Jaimes Becerra et al. (2023), where I tried to calculate the total and percentage of CBDCs
that could be considered green or sustainable. However, in my method, I considered one monetary
unit issued in the CBDC format as green/sustainable for each point a country obtains in the adjusted
Environmental Performance Index, a method already followed for the case of cryptocurrencies by
Náñez Alonso et al. (2021).
Finally, and after applying the method described above, I answered the question, “Which
countries are closest to having green CBDCs?” The results show that the countries that could launch a
higher percentage of green/sustainable CBDCs in circulation would be countries in the Eurozone and
the United Kingdom. These countries exceed 70% and are well ahead of the rest of the countries
included in this study. Sweden ranks third with just over 60% of its CBDC considered
green/sustainable, followed by Australia with 58% and the Bahamas with around 54%. The countries
that occupy the top positions are European countries along with one country from Oceania and another
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from the Americas. Only the Bahamas has already launched and is operating its CBDC. Jamaica is
also in the top ten positions and has its CBDC in operation. Japan closes the top 10 with just over 51%.
Although my method differs from that applied by Jaimes Becerra et al. (2023), the results coincide in
highlighting the countries of the Eurozone, as well as Norway and the United Kingdom, among those
countries that could sustainably support a higher percentage of CBDCs. The results also coincide for
Australia, New Zealand and South Korea. However, the results differ for China and Iran since, in my
case, these two countries occupy a medium and a very low position, respectively, in terms of the
percentage of green or sustainable CBDCs that could be supported.
This study is innovative and closes an existing gap in the field of CBDC sustainability. It is the
second study known to date after the one published by Jaimes Becerra et al. (2023), which attempts to
develop a method to classify countries according to the sustainability of their future CBDCs. The
limitations of the study include the following: First, the sample of countries or currency areas is 34. Eight
jurisdictions were selected where their central banks (CBs) have already implemented a CBDC or have
conducted a pilot test (or will do so soon); twenty jurisdictions were selected where their central banks
have conducted proofs of concept or prototypes (or will do so soon); and six jurisdictions were selected
where their central banks have their CBDCs in advanced stages of research and development. As the
number of jurisdictions in each group under study changes in future research, it is possible that the
rankings will change, although the methodology will remain the same and can be replicated. Second, the
variation in total reserves and the changes in the EPI annually in terms of the price of energy or gas
emissions mean that the obtained results are the product of a specific year and may be different in the
future with variations in the factors mentioned above. However, this article lays the foundations for
subsequent studies on CBDCs and their sustainability. The authorities of each country should take energy
production into account when designing policies related to the demand for future CBDCs, bearing in
mind that green energy production contributes to conserving resources and reducing environmental
degradation (Batrancea and Tulai, 2022). The growing adoption of CBDCs, with a focus on sustainability,
points to a critical need to align financial policies with environmental objectives. The pressure to move
toward a greener economy demands that governments carefully consider the environmental impact of
their decisions related to CBDCs. In addition, citizens' trust in their institutions, including central banks,
stands out as a key factor. Sustainability and respect for the environment have become guiding principles,
as evident in recent pronouncements by international organizations. This implies that public policies
should prioritize sustainability in the design and implementation of CBDCs.
6. Conclusions
Within digital finance, CBDCs are currently booming, and since there are currently four
operational CBDCs and as many as ninety-four central banks, jurisdictions or monetary areas are
testing or investigating the launch of a retail CBDC. As a future player in the global financial system,
CBDCs must pursue energy sustainability and achieve environmental friendliness. I calculated the
total and percentage of CBDCs that could be considered green or sustainable for each country or
currency area according to my model. I considered one monetary unit issued in the CBDC format as
green/sustainable for each point a country obtains in the Environmental Performance Index adjusted
according to the following four variables: electricity prices for households (kWh, U.S. dollar),
renewable electricity production (% of total electricity production), CO2 emissions (metric tons per
capita) and electricity prices for businesses (kWh, U.S. dollar). The countries that could launch a higher
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percentage of green/sustainable CBDCs in circulation would be countries in the Eurozone and the
United Kingdom. These countries are above 70% and well ahead of the rest of the countries included
in this study. Sweden ranks third with just over 60%, followed by Australia with 58% and the Bahamas
with around 54%. The countries that occupy the top positions are European countries along with one
country from Oceania and another from the Americas. Only the Bahamas has already launched and is
operating its CBDC. Jamaica is also in the top ten positions and has its CBDC in operation. Japan
closes the top 10 with just over 51%. Those countries with cleaner sources of power generation will
be able to keep their CBDCs operating more sustainably. The environmental impact, however, will
vary depending on the design choices of a CBDC and the country where it operates.
Use of AI tools declaration
The author declares he did not use Artificial Intelligence (AI) tools in the creation of this article.
Acknowledgments
The author would like to thank the UCAV for its strong support in this research. The author would
also like to thank Tableau Inc. for allowing him to use their analysis program free of charge for
scientific purposes.
The author wishes to thank the reviewers and the editor for their suggestions for improvement
and proposed changes.
Finally, the author would like to thank his newborn son, Pablo, for being a source of inspiration
and for forgiving his father for the time he has taken away from his son's attention.
Funding
This research was partially funded by an incentive granted to the author by the Catholic University
of Ávila and by the project Finance for All (F4A), funded by the “Institución Gran Duque de Alba”
and “Diputación provincial de Ávila”, under the grant 3364/2022.
Conflict of interest
All author declares no conflicts of interest.
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