Slate has an awesome video clip investigating whether it's better for the environment to use paper towels or an electric hand dryer when you wash your hands in a public restroom.  I am absolutely in love with this video because they actually did the math.  Doing the math is a rare thing in green discussions. Think about how long the "paper or plastic" debate raged, before "reusable canvas tote" finally solved the argument.  

It's not impossible to do the math - in fact, it turns out to be a fairly easy process. I have walked through this process for several different personal projects.  This is valuable as a mental exercise, if only because following the science is a skill our culture doesn't really value.  And sometimes the math can turn up some real surprises, because a lot of the carbon footprint of a product or process is often hidden from the consumer.  

For example, Slate found that paper towels have a significantly higher carbon footprint than electric hand dryers because the paper towels have to be shipped across the country - on vehicles that burn fuel.  Whereas the electric dryers, although they "cost" more in manufacturing materials and shipping weight, last at least 10 years and so only have to be shipped out once a decade.

Of course, carbon footprint isn't everything, although it is a valuable tool for assessing the impact of a given choice.  As Slate rightly points out, the paper for paper towels comes from tree farms, so deforestation of "wild" trees isn't an issue.  However, paper towels are sent to landfills wrapped in plastic garbage bags, so they do contribute to our growing landfill problem.  And since they are gathered in trash bags, they also contribute to the petroleum situation, as well as the issue of runaway plastic which ends up in places like the Pacific Gyre.

One solution has been adopted by only a small handful of places so far: composting paper towels.  Paper towels (particularly the rough, unbleached ones you usually find in public restrooms) are perfectly compostable.  I've heard of a restaurant in Seattle which composts its paper towels, and I attended two events here in Skagit County (the County Fair and the Anacortes Arts Fair) where multi-recycling stations were set up, so that you could not only recycle your soda bottles but compost your paper napkins.

The ultimate solution is pretty old school: those big roller towels, where you pull down a few inches of "clean" towel, and wipe your hands.  These never strike me as particularly sanitary, which is problematic in a public restroom.  I'm not a big germophobe, but wiping my hands where thousands of other people (most of whom probably didn't properly use soap and water) squicks me out.  I can think of at least one local business that has one of these roller towels, and whenever I use their restroom, I just wipe my hands on my pants.

Perhaps this would be an excellent time to advocate for the return of the cloth hankie!  Just be sure you don't wipe your hands on your nose-blowing hankie, and you'll do fine.