I just stumbled across this, which does a good job of summarizing the who externalities problem with how the economy works:
http://www.storyofstuff.com/
It made me realize that GOG is good for the environment on a number of levels. First, no packaging or pollution generated by transportation. Second, you can play the games on old hardware and keep that PC a few more years. Third, these games are better than recycled, they're "reused." All of the environmental impact of producing them happened in the past.
Another reason to feel good about GOG.

When you think about the huge shift going on in media toward digital sales, it really makes you realize how much less waste there will be.
Games - No more cardboard for package, plastic for disc and case, and gasoline for transport
Books - No more paper for printing, gasoline for transport
Music - No more plastic for disc and case, and gasoline for transport
Movies - No more plastic for disc and case, and gasoline for transport
When you look at the volume sold in the nineties for each of these, it really is a lot of natural resources that aren't being used anymore. It also takes up so much less space in people's homes, offices, and libraries. It used to be that you had to have a bookshelf, CD shelf, DVD/VHS shelf, etc. Now it is all on hard drives and flash storage.

True, but a part of me still prefers holding on to physical media. I still have those big boxes of games from the early 90s shelved away under my clothes cabinet. I guess I'm one of those who enjoys collecting these boxes, since it satisfies an earlier, younger geek in me, and also brings back some nice memories when I look at the manuals. It also makes it easier for consolidation of my games, since I tend to forget about digitally bought games that aren't tied to my Steam or Impulse account. I can see why digital distribution value-adds to those who throw away game boxes and manuals though.

One of the reasons I supported the move to DVD cases for games was because of how wasteful those old huge boxes used to be. Of course, being able to fit more than a dozen on a shelf helps too.
But yes, digital distribution is better still in some regards. No shelf clutter at all.

As much as I support any shifts towards eco-friendly methodologies, the thought of books no longer being on paper sends shivers to my core. Books are meant to be held, to be felt and to be, most importantly, smelt. Nothing in this world can compare to the smell of quality paper with an expert binding. Although I doubt books are in trouble regarding this anytime soon, it would nevertheless be an abject tragedy and scar on our human existence if books were no longer printed on paper. But, hopefully, by that time, my life on this planet will be done :P
Oh, and while I wholly support digital distribution of games, eventually, you all don't know it yet *grins* but you will miss the ability to physically hold a video game. Our modern times are presenting us with a great disjuncture between the links of our creations - if all we create remains within the realm of the intangible, well, frankly, we have lost a part of ourselves. And yes, I realise this isn't universally applicable, it's just the general idea :)
But, other than that, go GOG! Saving our planet one game at a time. Very nice idea you raised OP.

I'm kind of sad about it, on one hand digital distribution allows me to buy/get/install a game without moving my lazy butt but i miss the media. I have shelves upon shelves of books, dvds, and games. What i really want is the option of having my entertainment delivered to me either through my computer or in a packaging i can display on my shelves. As a matter of fact, a lot of times i end up buying something twice just so i can have a boxed copy, Torchlight for example, i bought it off steam and then i purchased it from Wal-Mart a couple of months later.
Plus there is no replacing old time packaging, i'm sure the old farts in here can remember that opening an Infocom or Origin box was a big deal in itself, if only to have another cloth map or a GUE coin. Those times are long gone and it feels like we are getting less for the money.

Ah but the question now is, does GOG use "Green" servers. I.e, ones that derive their primary source of electricity (or at least a large portion of it) from "eco-friendly" power sources, such as wind farms, solar panels, etc.
Of course, they probably still need a diesel generator too for backup (so they can't really ever be 100% "green".
The point is though, that just cutting down on packaging isn't really enough to claim being green if your operation is causing a significant "carbon footprint".
God I hate these "green" terms myself.

My wife and I have separate computers, but in the living room we share shelves for physical media. Buying digital avoids a battle over shelf space.

The vast majority of the transportation-related pollution comes from transporting other goods, anyway. Like food and water. And raw burgers for McDonalds.
Also, it's not like the existense of GOG is going to make people change their minds about getting that fancy up to date computer.
So, GOG being eco friendly is a false pretense, but at least I don't have to dig out an actual box from what can only be described as debris every once in a blue moon when I feel like playing HOMM 2 again.

Stardock is sweet in this way, as are some music labels/outlets -- if you buy the physical copy, you get the download version too. If they aren't going to pass the savings of digital distribution on to us, might as well give us both versions.

Lets not forget something though...
There's jobs in that there waste!
Packaging requires production, transport and disposal, both of which help create loads of jobs.
What would those people do if we vastly reduce our waste?
Capitalism requires these things to continue!

I'm not sure about this. Isn't the essence of what we've created already intangible? Or, doesn't the main attraction of books/games exist independently of their packaging? I love books for the thoughts they stimulate in my mind, but those thoughts exist only in my mind; they have nothing to do with the physical medium.
In case anybody's still reading this, there's a great TED presentation by Rory Sutherland in which he argues that all value is perceived value.
Just my $.02

Not really. Most of that packaging and such is done via automated assembly lines, no jobs to gain or lose there. Transportation might take a minor hit (very minor, media only makes up a fraction of transported goods), but there are certainly plenty of physical products that can't be distributed digitally (you can't download milk and bread), so transportation will still be kept busy. Disposal... well, we are a society of disposable goods, there will always be a need for people to take care of our trash. Even if we were to end up going "100% green" with all biodegradable packaging, somebody still needs to haul that stuff away to a landfill. If we were to take media to all-digital only, it really wouldn't impact much in the way of jobs, but at the same time, it really doesn't impact much in the way of the environment either.

It's a shame my actual shelves don't expand whenever I need them to. :D