No More Penny Production

While discussions had occurred back in February, as of today, it is more or less official that when certain materials run out, the US will discontinue producing new pennies (likely in 2026). Any already in circulation can continue to be accepted, but over time they will essentially phase out of the economy.

Now this is the kind of “efficiency” I can get behind. There are still tons of solutions toward efficiency the government could pursue and many they are calling efficiency are not, but actions like these can be lauded on their own without justifying those other actions or lack thereof.

Per Axios, the U.S. Mint lost “$85.3 million on the nearly 3.2 billion pennies it produced in the 2024 fiscal year that ended in September.”

Last year, there were debates about the role of private equity, Coinstar, and others in preventing the elimination of the penny. While not irrelevant, simple inertia seemed to be the bigger barrier to change.

Benefits and Risks

These discussions aren’t new. Over a decade ago one of the argumentative prompts on my AP English Exam was to synthesize arguments on one side of the penny debate. Our sources were more than a decade old at that time as well.

In addition to the costs (more than three cents to produce one), there are myriad other benefits to ending penny production - and risks. Nickels too have a great cost in materials and production - costing about 13 cents to make!

Many of the metals in coin production have been important commodities in our society for a long time and increasingly so as they are used in electric vehicles, solar, and other clean energy technologies. Demand is only increasing so to see a reduction in demand from eliminating the penny should actually be good for the climate transition from a pricing standpoint. Of note, innovation is also occurring to shift and eliminate certain metal needs, especially for EVs, with new solutions using less critical metals while also extending the range of cars.

The Context of an Increasingly Cashless Society

Inflation has made pricing products to the penny less and less relevant and digital transactions can still easily be made “to the cent.” However, discussions on the penny have always raised the specter of costs increasing for consumers.

Certain countries that use the Euro automatically round to five cents even though a penny is technically available.

New York City banned stores from not accepting cash.

As we move toward a more cashless (or cash optional) society, though, attention should be paid to transaction fees and the inefficiency of cash rather than the changing of prices by one or a few cents. Further analysis is needed on impacts of penny elimination, which has largely not been done to date, but the unbanked and those without access to credit and related services face far more significant risks than changes by one cent.

Advertising

Related to the above, there is concern for the advertising industry and the ability of retailers to offer sales. Frankly, I am sure marketers will think of something new, and this change will only force them to be more creative while hopefully eliminating a psychological tool that has driven our consumer economy through pricing for too long. If anything, I hope it actually hinders their ability to coddle our materialism and gets each of us to buy just one less thing.

Any advertising beyond basic “information” and awareness that is meant to get us to take an action is an inefficiency economically. It goes against the idea of the “rational consumer.”

Recent lobbying trying to convince consumers that they will lose credit card points or see them taxed is part of this concept that I argue hurts consumers more than helps. Regulations responding to the 2008 financial crisis have been implemented in phases and some more recent ones meant to protect the integrity of the system were falsely construed as an attack on these point systems. Much like pricing to the .99, point systems tend to get us to spend more money than we otherwise would have. Whether we pay in cash or not, I hope the elimination of the penny does get us to think more rationally as consumers.

Mining

Mineral mining has been detrimental essentially since we as humans started doing it. It is extractive, harming the Earth and us in the process. It is also vital to many things we do and use.

The below graph from the US DOE and discovered by me in the wonderful newsletter Supercool, highlights various metals and their importance, relevance, and supply availabilities.

Approximately (very rough estimate) 15 million pounds of copper are currently in circulation from pennies and some other coins. That is only about .02% of the larger supply of copper traded annually for all other purposes. While even smaller than a drop in the bucket, at a time when copper prices are rising rapidly and a shortage has been declared, any amount not used for coinage is relevant. Zinc is also relevant to pennies and it will be interesting to see how its supply is affected once pennies are no longer produced. Canada already mostly phased out their penny, but if the US’ decision leads other countries to take action and eliminate theirs, the impact could be significant on metal supply.

How Do We Sustain With Age From Here?

More research is certainly needed to determine a full impact of phasing out penny production - from a material supply standpoint and potential consequences on consumers.

Current mining practices of these metals are incredibly detrimental to the environment and often employ slave and child labor so avoiding even a small amount of such practices by mining a bit less is valuable and should not be discounted.

Cemeteries repeatedly see theft of minor amounts of copper and zinc. Public EV chargers are also seeing small amounts of these materials stolen. If that is worthwhile, eliminating a demand source of even the size of the penny is worthwhile.

This is a large “small” action like the ones we face in our homes, neighborhoods, and workplaces.

Of note, with Lincoln already on the $5 bill, this decision also lacks typical fights over taking away recognition of historic figures. While adding Harriet Tubman to the $20 bill is a continual struggle, but one I still have hope for, if anyone else had been on the penny, barriers could have gone from inertia to outright activism.

As the UK delays adding the King to its currency, along with Australia, Canada, and other Commonwealth countries, we sit at a very interesting moment of coin developments that have a real impact on our economies and the climate transition.

Peace,

Kyle